$440,000,000 REVOLVING CREDIT FACILITY
CREDIT AGREEMENT
by and among
X. XXXXXXXXX ENTERPRISES, INC.
(as the Borrower)
HOVNANIAN ENTERPRISES, INC.
(as a Guarantor)
and
THE BANKS PARTY HERETO
and
PNC BANK, NATIONAL ASSOCIATION, as Administrative Agent
Bank of America, N.A., as
Syndication Agent
Fleet National Bank, as
Documentation Agent
PNC Capital Markets, LLC
Banc of America Securities, LLC
as
Joint Lead Arrangers and Joint Book Runners
Dated August 28, 2001
1. CERTAIN DEFINITIONS 1
1.1 Certain Definitions. 1
1.2 Construction. 19
1.2.1. Number; Inclusion.20
1.2.2. Determination.20
1.2.3. Agent's Discretion and Consent.20
1.2.4. Documents Taken as a Whole.20
1.2.5. Headings.20
1.2.6. Implied References to this Agreement.20
1.2.7. Persons.20
1.2.8. Modifications to Documents.20
1.2.9. From, To and Through.21
1.2.10. Shall; Will. 21
1.3 Accounting Principles. 21
2. REVOLVING CREDIT AND SWING LOAN FACILITIES 21
2.1 Revolving Credit Commitments. 21
2.1.1. Revolving Credit Loans.21
2.1.2. Swing Loan Commitment.21
2.1.3. Increase in Commitments After Closing Date.22
2.1.4. Voluntary Reduction of Commitment.22
2.2 Nature of Banks' Obligations with Respect to Revolving
Credit Loans. 22
2.3 Commitment Fees. 23
2.4 Revolving Credit Loan Requests; Swing Loan Requests.23
2.4.1. Revolving Credit Loan Requests.23
2.4.2. Swing Loan Requests.23
2.5 Making Revolving Credit Loans and Swing Loans. 24
2.5.1. Generally. 24
2.5.2. Making Swing Loans.24
2.6 Swing Loan Note. 24
2.7 Use of Proceeds. 24
2.8 Borrowings to Repay Swing Loans. 25
2.9 Letter of Credit Subfacility. 25
2.9.1. Issuance of Letters of Credit. 25
2.9.2. Letter of Credit Fees. 25
2.9.3. Disbursements, Reimbursement. 26
2.9.4. Repayment of Participation Advances. 27
2.9.5. Documentation. 27
2.9.6. Determinations to Honor Drawing Requests. 28
2.9.7. Nature of Participation and Reimbursement Obligations.28
2.9.8. Indemnity. 29
2.9.9. Liability for Acts and Omissions. 29
2.9.10. Sharing Letter of Credit Documentation. 30
2.10 Extension by Banks of the Expiration Date. 30
2.10.1. Requests; Approval by All Banks. 30
2.10.2. Approval by 80% Banks. 31
2.11 Designation of Subsidiaries and Release of Guarantors.32
2.11.1. Release of Guarantors. 32
2.11.2. Designation of Non-Restricted Person. 32
2.11.3. Automatic Designation of Non-Restricted Person. 32
2.11.4. Designation of Restricted Subsidiary. 33
3. INTEREST RATES 33
3.1 Interest Rate Options. 33
3.1.1. Revolving Credit Interest Rate Options.33
3.1.2. Rate Quotations.34
3.2 Interest Periods. 34
3.3 Interest After Default. 34
3.3.1. Default Rate.34
3.3.2. Acknowledgment.34
3.4 LIBO-Rate Unascertainable; Illegality; Increased Costs;
Deposits Not Available. 34
3.4.1. Unascertainable.34
3.4.2. Illegality; Increased Costs; Deposits Not Available.35
3.4.3. Agent's and Bank's Rights.35
3.5 Selection of Interest Rate Options. 36
4. PAYMENTS 36
4.1 Payments. 36
4.2 Pro Rata Treatment of Banks. 36
4.3 Interest Payment Dates. 37
4.4 Voluntary Prepayments. 37
4.4.1. Right to Prepay.37
4.4.2. Replacement of a Bank.38
4.4.3. Change of Lending Office.38
4.5 Mandatory Payments. 39
4.6 Additional Compensation in Certain Circumstances.39
4.6.1. Increased Costs or Reduced Return Resulting from Taxes,
Reserves, Capital Adequacy Requirements, Expenses, Etc. 39
4.6.2. Indemnity.40
4.7 Notes. 40
4.8 Settlement Date Procedures. 40
5. REPRESENTATIONS AND WARRANTIES 41
5.1 Representations and Warranties. 41
5.1.1. Organization and Qualification.41
5.1.2. Subsidiaries.41
5.1.3. Power and Authority.41
5.1.4. Validity and Binding Effect.42
5.1.5. No Conflict.42
5.1.6. Litigation.42
5.1.7. Title to Properties.42
5.1.8. Financial Statements.43
5.1.9. Use of Proceeds; Margin Stock. 43
5.1.10. Full Disclosure. 44
5.1.11. Taxes. 44
5.1.12. Consents and Approvals. 44
5.1.13. No Event of Default; Compliance with Instruments.44
5.1.14. Patents, Trademarks, Copyrights, Licenses, Etc. 45
5.1.15. Insurance. 45
5.1.16. Compliance with Laws. 45
5.1.17. Burdensome Restrictions. 45
5.1.18. Investment Companies; Regulated Entities. 45
5.1.19. Plans and Benefit Arrangements. 45
5.1.20. Employment Matters. 46
5.1.21. Environmental Matters. 47
5.1.22. Senior Debt Status. 47
5.2 Continuation of Representations. 47
6. CONDITIONS OF LENDING AND ISSUANCE OF LETTERS OF
CREDIT 47
6.1 First Loans and Letters of Credit. 47
6.1.1. Officer's Certificate.47
6.1.2. Incumbency Certificate.48
6.1.3. Delivery of Loan Documents .48
6.1.4. Opinion of Counsel.48
6.1.5. Legal Details.49
6.1.6. Payment of Fees.49
6.1.7. Consents.49
6.1.8. Officer's Certificate Regarding MACs.49
6.1.9. No Actions or Proceedings.49
6.1.10. Obligations under Existing Facility. 49
6.2 Each Additional Loan or Letter of Credit. 50
7. COVENANTS 50
7.1 Affirmative Covenants. 50
7.1.1. Preservation of Existence, Etc.50
7.1.2. Payment of Liabilities, Including Taxes, Etc.50
7.1.3. Maintenance of Insurance.51
7.1.4. Maintenance of Properties and Leases.51
7.1.5. Maintenance of Patents, Trademarks, Etc.51
7.1.6. Visitation Rights.51
7.1.7. Keeping of Records and Books of Account.51
7.1.8. Plans and Benefit Arrangements.52
7.1.9. Compliance with Laws.52
7.1.10. Use of Proceeds. 52
7.1.11. Required Dividends of KHL. 52
7.2 Negative Covenants. 52
7.2.1. Indebtedness.53
7.2.2. Liens.53
7.2.3. Loans and Investments.53
7.2.4. Liquidations, Mergers, Consolidations, Acquisitions.53
7.2.5. Dispositions of Assets or Subsidiaries; Sale and Leaseback.54
7.2.6. Restricted Payments; Restricted Investments. 55
7.2.7. Subsidiaries, Partnerships and Joint Ventures.56
7.2.8. Continuation of or Change in Business.56
7.2.9. Plans and Benefit Arrangements56
7.2.10. Borrowing Base56
7.2.11. Minimum ATNW.56
7.2.12. Leverage Ratio. 56
7.2.13. Inventory and Land Purchase Limits. 57
7.2.14. Fiscal Year.57
7.2.15. Changes in Subordinated Debt Documents.57
7.3 Reporting Requirements. 58
7.3.1. Quarterly Financial Statements.58
7.3.2. Annual Financial Statements.58
7.3.3. Certificates of the Borrower.59
7.3.4. Notice of Default.59
7.3.5. Notice of Litigation.60
7.3.6. Notice of Change in Debt Rating.60
7.3.7. Budgets, Forecasts, Other Reports and Information.60
7.3.8. Notices Regarding Plans and Benefit Arrangements.60
7.3.9. Update Regarding Subsidiary Matters. 61
8. DEFAULT 62
8.1 Events of Default. 62
8.1.1. Payments Under Loan Documents.62
8.1.2. Breach of Warranty.62
8.1.3. Breach of Certain Negative Covenants.62
8.1.4. Breach of Other Covenants.62
8.1.5. Defaults in Other Agreements or Indebtedness.63
8.1.6. Final Judgments or Orders.63
8.1.7. Loan Document Unenforceable.63
8.1.8. Uninsured Losses; Proceedings Against Assets.63
8.1.9. Notice of Lien or Assessment.63
8.1.10. Insolvency. 64
8.1.11. Events Relating to Plans and Benefit Arrangements. 64
8.1.12. Cessation of Business. 64
8.1.13. Change of Control. 64
8.1.14. Involuntary Proceedings. 65
8.1.15. Voluntary Proceedings. 65
8.2 Consequences of Event of Default. 65
8.2.1. Events of Default Other Than Bankruptcy, Insolvency or
Reorganization Proceedings. 65
8.2.2. Bankruptcy, Insolvency or Reorganization Proceedings.66
8.2.3. Set-off66
8.2.4. Suits, Actions, Proceedings.66
8.2.5. Application of Proceeds.67
8.2.6. Other Rights and Remedies.67
9. THE AGENT 67
9.1 Appointment. 67
9.2 Delegation of Duties. 67
9.3 Nature of Duties; Independent Credit Investigation.68
9.4 Actions in Discretion of Agent; Instructions From the
Banks. 68
9.5 Reimbursement and Indemnification of Agent by the Borrower. 69
9.6 Exculpatory Provisions; Limitation of Liability.69
9.7 Reimbursement and Indemnification of Agent by Banks.70
9.8 Reliance by Agent. 70
9.9 Notice of Default. 71
9.10 Notices. 71
9.11 Banks in Their Individual Capacities; Agents in its
Individual Capacity. 71
9.12 Holders of Notes. 72
9.13 Equalization of Banks. 72
9.14 Successor Agent. 72
9.15 Agent's Fee. 73
9.16 Availability of Funds. 73
9.17 Calculations. 73
9.18 Beneficiaries. 73
10. MISCELLANEOUS 74
10.1 Modifications, Amendments or Waivers. 74
10.1.1. Increase of Commitment. 74
10.1.2. Extension of Payment; Reduction of Principal, Interest or
Fees; Modification of Terms of Payment. 74
10.1.3. Miscellaneous 74
10.2 No Implied Waivers; Cumulative Remedies; Writing Required. 75
10.3 Reimbursement and Indemnification of Banks by the Borrower;
Taxes. 75
10.4 Holidays. 76
10.5 Funding by Branch, Subsidiary or Affiliate. 76
10.5.1. Notional Funding. 76
10.5.2. Actual Funding. 76
10.6 Notices. 77
10.7 Severability. 78
10.8 Governing Law. 78
10.9 Prior Understanding. 78
10.10 Duration; Survival. 78
10.11 Successors and Assigns. 79
10.12 Confidentiality. 80
10.12.1. General. 80
10.12.2. Sharing Information With Affiliates of the Banks.81
10.13 Counterparts. 81
10.14 Agent's or Bank's Consent. 81
10.15 Exceptions. 81
10.16 CONSENT TO FORUM; WAIVER OF JURY TRIAL. 81
10.17 Tax Withholding Clause. 82
10.18 Joinder of Guarantors. 83
10.19 Concerning Agent Terms. 83
LIST OF SCHEDULES AND EXHIBITS
SCHEDULES
SCHEDULE 1.1(A) - APPLICABLE MARGIN
SCHEDULE 1.1(B) - COMMITMENTS OF BANKS AND ADDRESSES FOR
NOTICES
SCHEDULE 1.1(C) - LISTING OF RESTRICTED SUBSIDIARIES, JOINT
VENTURES, MORTGAGE SUBSIDIARIES AND NON-RESTRICTED
PERSONS
SCHEDULE 1.1(E) - INCOME PRODUCING PROPERTIES
SCHEDULE 1.1(P) - PERMITTED LIENS
SCHEDULE 2.9.1 - EXISTING LETTERS OF CREDIT
SCHEDULE 5.1.2 - SUBSIDIARIES
SCHEDULE 5.1.12 - CONSENTS AND APPROVALS
SCHEDULE 7.2.1 - PERMITTED INDEBTEDNESS
EXHIBITS
EXHIBIT 1.1(A) - ASSIGNMENT AND ASSUMPTION AGREEMENT
EXHIBIT 1.1.(B)(1) - BANK JOINDER
EXHIBIT 1.1(G) - GUARANTOR JOINDER
EXHIBIT 1.1(R) - REVOLVING CREDIT NOTE
EXHIBIT 1.1(S) - SWING LOAN NOTE
EXHIBIT 2.4.1 - LOAN REQUEST
EXHIBIT 2.4.2 - SWING LOAN REQUEST
EXHIBIT 7.3.3 - QUARTERLY COMPLIANCE CERTIFICATE
EXHIBIT 7.3.3.2 - BORROWING BASE CERTIFICATE
CREDIT AGREEMENT
THIS CREDIT AGREEMENT is dated August 28, 2001 and is made by and among
X. XXXXXXXXX ENTERPRISES, INC., a New Jersey corporation (the "Borrower"),
HOVNANIAN ENTERPRISES, INC., a Delaware corporation ("Hovnanian" and a
"Guarantor"), the BANKS (as hereinafter defined), and PNC BANK, NATIONAL
ASSOCIATION, in its capacity as administrative agent for the Banks under
this Agreement (hereinafter referred to in such capacity as the "Agent").
WITNESSETH:
WHEREAS, the Borrower has requested the Banks to provide a revolving
credit facility to the Borrower in an aggregate principal amount not to
exceed $440,000,000;
WHEREAS, the revolving credit shall be used to refinance existing
indebtedness, provide for letters of credit and provide working capital and
funds for general corporate purposes; and
WHEREAS, the Banks are willing to provide such credit upon the terms
and conditions hereinafter set forth;
NOW, THEREFORE, the parties hereto, in consideration of their mutual
covenants and agreements hereinafter set forth and intending to be legally
bound hereby, covenant and agree as follows:
1. CERTAIN DEFINITIONS
1.1 Certain Definitions.
In addition to words and terms defined elsewhere in this Agreement, the
following words and terms shall have the following meanings, respectively,
unless the context hereof clearly requires otherwise:
Actual Leverage shall mean the ratio of (x)(i) Homebuilding Indebtedness
minus (ii) Excess Cash to (y) Adjusted Tangible Net Worth.
Additional Bank shall have the meaning assigned to that term in Section
10.11(b) (Successors and Assigns).
Adjusted Operating Income shall mean for any period the sum of (x)
consolidated net income of Hovnanian for such period, (y) to the extent
deducted in arriving at such net income, consolidated income taxes,
consolidated interest expense, Letter of Credit Fees, depreciation,
amortization, non-cash valuation charges or adjustments and (z) cash
distributions received by any Loan Party from Non-Restricted Persons during
such period. Adjusted Operating Income shall exclude net income or loss of
Non-Restricted Persons.
Adjusted Tangible Net Worth (or ATNW) shall mean (x) consolidated
shareholders equity of Hovnanian minus, without duplication (y) (i)
Intangibles, (ii) the Dollar amount of Restricted Investments and (iii)
equity (comprising "cost" according to GAAP minus the amount of debt secured
by applicable mortgages) in residential inventory properties with Purchase
Money Mortgages, all as calculated and consolidated in accordance with GAAP.
Affiliate as to any Person shall mean any other Person (i)which directly or
indirectly controls, is controlled by, or is under common control with such
Person, (ii)which beneficially owns or holds 10% or more of any class of the
voting or other equity interests of such Person, or (iii)10% or more of any
class of voting interests or other equity interests of which is beneficially
owned or held, directly or indirectly, by such Person. Control, as used in
this definition, shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise, including the power to elect a majority of the directors or
trustees of a corporation or trust, as the case may be.
Agent shall mean PNC Bank, National Association, and its successors and
assigns.
Agent's Fee shall have the meaning assigned to that term in Section 9.15
(Agent's Fee).
Agent's Letter shall have the meaning assigned to that term in Section 9.15
(Agent's Fee).
Agreement shall mean this Credit Agreement, as the same may be supplemented
or amended from time to time, including all schedules and exhibits.
Annual Statements shall have the meaning assigned to that term in Section
5.1.8((i) (Historical Statements)).
Applicable Commitment Fee Rate shall mean the percentage rate per annum at
the indicated level of Debt Rating in the pricing grid on Schedule 1.1(A)
below the heading "Commitment Fee." The Applicable Commitment Fee Rate shall
be computed in accordance with the parameters set forth on Schedule 1.1(A).
Applicable Letter of Credit Fee Rate shall mean the percentage rate per annum
at the indicated level of Debt Rating in the pricing grid on Schedule 1.1(A)
below the heading "LOC Fee." The Applicable Letter of Credit Fee Rate shall
be computed in accordance with the parameters set forth on Schedule 1.1(A).
Applicable Margin shall mean, as applicable:
(A) the percentage spread to be added to Base Rate under the Revolving
Credit Base Rate Option at the indicated level of Debt Rating in the pricing
grid on Schedule 1.1(A) below the heading "Base Rate Margin,"
(B) the percentage spread to be added to LIBO-Rate under the Revolving
Credit LIBO-Rate Option at the indicated level of Debt Rating in the pricing
grid on Schedule 1.1(A) below the heading "Libor Margin".
The Applicable Margin shall be computed in accordance with the parameters set
forth on Schedule 1.1(A).
Assignee Bank shall have the meaning assigned to such term in Section 2.10.2
(Approval by 80% Banks).
Assignment and Assumption Agreement shall mean an Assignment and Assumption
Agreement by and among a Purchasing Bank, a Transferor Bank and the Agent, as
Agent and on behalf of the remaining Banks, substantially in the form of
Exhibit 1.1(A).
Authorized Officer shall mean those individuals, designated by written notice
to the Agent from the Borrower, authorized to execute notices, reports and
other documents on behalf of the Loan Parties required hereunder. The
Borrower may amend such list of individuals from time to time by giving
written notice of such amendment to the Agent.
Banks shall mean the financial institutions named on Schedule 1.1(B) and
their respective successors and assigns as permitted hereunder, each of which
is referred to herein as a Bank.
Base Rate shall mean the greater of (i) the interest rate per annum announced
from time to time by the Agent at its Principal Office as its then prime
rate, which rate may not be the lowest rate then being charged commercial
borrowers by the Agent, or (ii)the Federal Funds Effective Rate plus 1/2% per
annum.
Base Rate Option shall mean the Revolving Credit Base Rate Option.
Benefit Arrangement shall mean at any time an "employee benefit plan," within
the meaning of Section 3(3) of ERISA, which is neither a Plan nor a
Multiemployer Plan and which is maintained, sponsored or otherwise
contributed to by the Borrower.
Borrower shall mean X. Xxxxxxxxx Enterprises, Inc., a corporation organized
and existing under the laws of the State of New Jersey and wholly-owned by
Hovnanian.
Borrowing Base shall mean at any time, the Dollar amount equal to the sum of
the following items, each owned free and clear of all Liens (except Permitted
Liens of the type described in items (i), (ii), (iii), (iv), (v) and (vi) of
the definition of "Permitted Liens") by the Borrower, Hovnanian or a
Restricted Subsidiary:
(i)100% of Excess Cash;
(ii)95% of Sold Homes;
(iii)70% of Unsold Homes; and
(iv)55% of Finished Lots and Land Under Development;
provided however that the Borrowing Base shall exclude in all events the
Dollar amount of
(i) property located outside of the United
States of America in excess of
$10,000,000;
(ii) Unimproved Land;
(iii) any residential or commercial property
owned by Hovnanian or any Subsidiary which is leased or held for purposes of
leasing primarily to unaffiliated third parties; and
(iv) properties subject to any Purchase Money
Mortgage.
The determination of the Agent in respect of the Borrowing Base shall be
conclusive absent manifest error.
Borrowing Base Certificate shall mean the Borrowing Base Certificate in the
form of Exhibit 7.3.3.2 duly completed and delivered by the Borrower pursuant
to Section 7.3.3.2 (Borrowing Base Certificate).
Borrowing Date shall mean, with respect to any Loan, the date for the making
thereof or the renewal or conversion thereof at or to the same or a different
Interest Rate Option, which shall be a Business Day.
Borrowing Tranche shall mean specified portions of Loans outstanding as
follows: (i)any Loans to which a LIBO-Rate Option applies which become
subject to the same Interest Rate Option under the same Loan Request by the
Borrower and which have the same Interest Period shall constitute one
Borrowing Tranche, and (ii)all Loans to which a Base Rate Option applies
shall constitute one Borrowing Tranche.
Business Day shall mean any day other than a Saturday or Sunday or a legal
holiday on which commercial banks are authorized or required to be closed for
business at the Principal Office and if the applicable Business Day relates
to any Loan to which the LIBO-Rate Option applies, such day must also be a
day on which dealings are carried on in the London interbank market.
Capital Stock Retirement shall mean any repurchase, redemption, acquisition
or retirement of any capital stock or other ownership interest of Hovnanian
or of any warrants, options or other rights to purchase such capital stock or
other ownership interest; provided that "Capital Stock Retirement" shall not
include the conversion or exchange of any of the foregoing into shares of
capital stock of Hovnanian.
Cash Flow shall mean Adjusted Operating Income plus any decrease in any Sold
Homes, Unsold Homes, Unimproved Land or Finished Lots and Land Under
Development which is not the result of a valuation charge or adjustment (or
minus any increase in any of the foregoing categories).
Cash Flow Coverage Ratio shall mean the ratio, as of any date of
determination, of (x) Cash Flow for the prior twelve (12) months to (y) four
(4) multiplied by Fixed Charges for the most-recently ended fiscal quarter.
Closing Date shall mean the Business Day on which the first Loan shall be
made, which shall be August 28, 2001. The closing shall take place at 11:00
a.m., Eastern time, on the Closing Date at the offices of Xxxxxxxx Ingersoll
Professional Corporation, Philadelphia, Pennsylvania, or at such other time
and place as the parties agree.
Commitment shall mean as to any Bank its Revolving Credit Commitment and, in
the case of the Agent, its Revolving Credit Commitment and its Swing Loan
Commitment; and Commitments shall mean the aggregate of the Revolving Credit
Commitments of all of the Banks, including the Swing Loan Commitment of the
Agent.
Commitment Fee shall have the meaning assigned to that term in Section 2.3
(Commitment Fees).
Compliance Certificate shall have the meaning assigned to such term in
Section 7.3.3 (Certificates of the Borrower).
Contamination shall mean the presence or release or threat of release of
Regulated Substances in, on, under or emanating to or from any of the
Property, which pursuant to Environmental Laws requires notification or
reporting to an Official Body, or which pursuant to Environmental Laws
requires the investigation, cleanup, removal, remediation, containment,
abatement of or other response action or which otherwise constitutes a
violation of Environmental Laws.
Debt Rating shall mean the rating of Hovnanian's senior unsecured long-term
debt by each of Standard & Poor's and Xxxxx'x.
Default Rate shall have the meaning assigned to that term in Section 3.3.l
(Default Rate).
Dividends shall mean any dividend or distribution by a Person in respect of
its capital stock or ownership interests, whether in cash, property or
securities.
Dollar, Dollars, U.S. Dollars and the symbol $ shall mean lawful money of the
United States of America.
Drawing Date shall mean each date that an amount is paid by the Letter of
Credit Bank under any Letter of Credit.
Dwelling Unit shall mean a residential housing unit held for sale by a Loan
Party.
Environmental Complaint shall mean any written complaint by any Person or
Official Body setting forth a cause of action for personal injury or property
damage, natural resource damage, contribution or indemnity for response
costs, civil or administrative penalties, criminal fines or penalties, or
declaratory or equitable relief arising under any Environmental Laws or under
any order, notice of violation, citation, subpoena, request for information
or other written notice or demand of any type issued by an Official Body
pursuant to any Environmental Laws.
Environmental Laws shall mean all federal, state, local and foreign Laws and
any consent decrees, settlement agreements, judgments, orders, directives,
policies or programs issued by or entered into with an Official Body
pertaining or relating to: (i)pollution or pollution control; (ii)protection
of human health or the environment; (iii)employee safety in the workplace;
(iv)the presence, use, management, generation, manufacture, processing,
extraction, treatment, recycling, refining, reclamation, labeling, transport,
storage, collection, distribution, disposal or release or threat of release
of Regulated Substances; (v)the presence of Contamination; (vi)the protection
of endangered or threatened species; and (vii) the protection of
Environmentally Sensitive Areas.
Environmentally Sensitive Area shall mean (i) any wetland as defined by
applicable Environmental Laws; (ii) any area designated as a coastal zone
pursuant to applicable Laws, including Environmental Laws; (iii) any area of
historic or archeological significance or scenic area as defined or
designated by applicable Laws, including Environmental Laws; (iv)habitats of
endangered species or threatened species as designated by applicable Laws,
including Environmental Laws; or (v) a floodplain or other flood hazard area
as defined pursuant to any applicable Laws.
ERISA shall mean the Employee Retirement Income Security Act of 1974, as the
same may be amended or supplemented from time to time, and any successor
statute of similar import, and the rules and regulations thereunder, as from
time to time in effect.
ERISA Group shall mean, at any time, the Borrower and any entity (whether or
not incorporated) that is under common control with the Borrower within the
meaning of Section 4001 of ERISA, or the Borrower l and all other entities
which, together with the Borrower, are treated as a single employer under
Sections 414 (b) or (c) of the Internal Revenue Code.
Event of Default shall mean any of the events described in Section 8.1
(Events of Default) and referred to therein as an "Event of Default."
Excess Cash shall mean cash that would appear on a consolidated balance sheet
of Hovnanian (to the extent not pledged or encumbered in any way) in excess
of $10,000,000.
Existing Facility shall mean the $375,000,000 facility provided pursuant to
the Second Amended and Restated Credit Agreement dated as of February 22,
2000, as amended, by and among the Borrower, Hovnanian, certain subsidiaries
thereof, PNC Bank as Administrative Agent and certain other parties.
Existing Related Business shall mean any mortgage services, income property
management and title insurance businesses as such businesses are operated as
of the Closing Date.
Expiration Date shall mean, with respect to the Revolving Credit Commitments,
July 30, 2004 as such may be extended pursuant to Section 2.10 (Extension by
Banks of the Expiration Date).
Extending Bank shall have the meaning assigned to such term in Section 2.10.2
(Approval by 80% Bank).
Federal Funds Effective Rate for any day shall mean the rate per annum (based
on a year of 360 days and actual days elapsed and rounded upward to the
nearest 1/100 of 1%) announced by the Federal Reserve Bank of New York (or
any successor) on such day as being the weighted average of the rates on
overnight federal funds transactions arranged by federal funds brokers on the
previous trading day, as computed and announced by such Federal Reserve Bank
(or any successor) in substantially the same manner as such Federal Reserve
Bank computes and announces the weighted average it refers to as the "Federal
Funds Effective Rate" as of the date of this Agreement; provided, if such
Federal Reserve Bank (or its successor) does not announce such rate on any
day, the "Federal Funds Effective Rate" for such day shall be the Federal
Funds Effective Rate for the last day on which such rate was announced.
Financial Projections shall have the meaning assigned to that term in Section
5.1.8((ii)) [Financial Projections].
Finished Lots and Land Under Development shall mean the Dollar amount of the
lower of (x) actual cost (including land costs and capitalized expenses
relating thereto) or (y) the market value (determined in accordance with
GAAP) of any land that has been granted Preliminary Approvals until a time
which is the earlier of when (x) it is "Unsold Homes" and (y) it is "Sold
Homes".
Fixed Charge Coverage Ratio shall mean the ratio, as of any date of
determination, of (x) Adjusted Operating Income for the prior twelve (12)
months to (y) four (4) multiplied by Fixed Charges for the most-recently
ended fiscal quarter.
Fixed Charges shall mean the sum of (i) interest cost incurred on all Senior
Homebuilding Indebtedness over the past fiscal quarter; (ii) interest cost
incurred on the Subordinated Debt over the past fiscal quarter; (iii) 50% of
the interest cost incurred on all Purchase Money Mortgages over the past
fiscal quarter; (iv) Letter of Credit Fees accrued over the past fiscal
quarter; and (v) the interest component of capitalized leases over the past
fiscal quarter.
GAAP shall mean generally accepted accounting principles as are in effect
from time to time, subject to the provisions of Section 1.3 (Accounting
Principles), and applied on a consistent basis both as to classification of
items and amounts.
Governmental Acts shall have the meaning assigned to that term in Section
2.9.8 (Indemnity).
Guarantor shall mean each of the parties to the Guaranty Agreement (and
designated as a "Guarantor" on Schedule 1.1(C)) and each other Person which
joins the Guaranty Agreement as a Guarantor after the date hereof pursuant to
Section 10.18 (Joinder of Guarantors). As of the Closing Date, KHL shall not
be a Guarantor and Hovnanian shall be a Guarantor and all Restricted
Subsidiaries other than the Borrower and KHL shall be Guarantors.
Guarantor Joinder shall mean a joinder by a Person as a Guarantor under the
Guaranty Agreement in the form of Exhibit 1.1(G).
Guaranty of any Person shall mean any obligation of such Person guaranteeing
or in effect guaranteeing any Indebtedness of any other Person in any manner,
whether directly or indirectly.
Guaranty Agreement shall mean the Guaranty and Suretyship Agreement executed
and delivered by each of the Guarantors to the Agent for the benefit of the
Banks.
Historical Statements shall have the meaning assigned to that term in Section
5.1.8((i)) (Historical Statements).
Homebuilding Indebtedness shall mean the sum of (x) Senior Homebuilding
Indebtedness and (y) Subordinated Debt.
Hovnanian shall mean Hovnanian Enterprises, Inc., a Delaware corporation,
shares of whose Class A Common Stock are registered pursuant to the
Securities Exchange Act of 1934.
Indebtedness shall mean, as to any Person at any time, any and all
indebtedness, obligations or liabilities (whether matured or unmatured,
liquidated or unliquidated, direct or indirect, absolute or contingent, or
joint or several) of such Person for or in respect of: (i)borrowed money,
(ii)amounts raised under or liabilities in respect of any note purchase or
acceptance credit facility, (iii)reimbursement obligations (contingent or
otherwise) under any letter of credit, (iv)any other transaction (including
forward sale or purchase agreements, capitalized leases and conditional sales
agreements) having the commercial effect of a borrowing of money entered into
by such Person to finance its operations or capital requirements (but not
including trade payables and accrued expenses incurred in the ordinary course
of business which are not more than ninety (90) days past due or that are
being contested in good faith by appropriate proceedings), if and to the
extent any of any of the foregoing in this item (iv) would appear as a
liability on the balance sheet of such Person prepared on a consolidated
basis in accordance with GAAP, or (v)any Guaranty of Indebtedness for
borrowed money.
Ineligible Security shall mean any security which may not be underwritten or
dealt in by member banks of the Federal Reserve System under Section 16 of
the Banking Act of 1933 (12 U.S.C. Section 24, Seventh), as amended.
Insolvency Proceeding shall mean, with respect to any Person, (a)a case,
action or proceeding with respect to such Person (i)before any court or any
other Official Body under any bankruptcy, insolvency, reorganization or other
similar Law now or hereafter in effect, or (ii)for the appointment of a
receiver, liquidator, assignee, custodian, trustee, sequestrator, conservator
(or similar official) of any Loan Party or otherwise relating to the
liquidation, dissolution, winding-up or relief of such Person, or (b)any
general assignment for the benefit of creditors, composition, marshaling of
assets for creditors, or other, similar arrangement in respect of such
Person's creditors generally or any substantial portion of its creditors
undertaken under any Law.
Intangibles shall mean all patents, patent applications, copyrights,
trademarks, tradenames, goodwill, organization expenses and other like items
of Hovnanian and its Subsidiaries which are treated as intangibles under
GAAP.
Interest Period shall mean the period of time selected by the Borrower in
connection with (and to apply to) any election permitted hereunder by the
Borrower to have Revolving Credit Loans bear interest under the LIBO-Rate
Option. Subject to the last sentence of this definition, such period shall
be one, two, three or six Months if Borrower selects the LIBO-Rate Option.
Such Interest Period shall commence on the effective date of such Interest
Rate Option, which shall be (i) the Borrowing Date if the Borrower is
requesting new Loans, or (ii) the date of renewal of or conversion to the
LIBO-Rate Option if the Borrower is renewing or converting to the LIBO-Rate
Option applicable to outstanding Loans. Notwithstanding the second sentence
hereof: (A) any Interest Period which would otherwise end on a date which is
not a Business Day shall be extended to the next succeeding Business Day
unless such Business Day falls in the next calendar month, in which case such
Interest Period shall end on the next preceding Business Day, and (B) the
Borrower shall not select, convert to or renew an Interest Period for any
portion of the Loans that would end after the Expiration Date.
Interest Rate Option shall mean any LIBO-Rate Option or Base Rate Option.
Interim Statements shall have the meaning assigned to that term in Section
5.1.8((i)) (Historical Statements).
Internal Revenue Code shall mean the Internal Revenue Code of 1986, as the
same may be amended or supplemented from time to time, and any successor
statute of similar import, and the rules and regulations thereunder, as from
time to time in effect.
Investment shall mean any loan or advance to or on behalf of, or purchase,
acquisition or ownership of any stock, bonds, notes or securities of, or any
partnership interest (whether general or limited) or limited liability
company interest in, or any other similar investment or interest in, or any
capital contribution made to, any other Person, or any agreement to become or
remain liable to do any of the foregoing.
Investment in Related Business shall mean the Investments by any of
Hovnanian and the Restricted Subsidiaries in (i) income-producing properties
other than those listed on Schedule 1.1E; or (ii ) Existing Related
Businesses.
Joint Ventures shall mean any Person in whom a Loan Party has an ownership
interest and which is not a "Subsidiary". Each of the Joint Ventures as of
the Closing Date is listed on Schedule 1.1(C).
KHL shall mean KHL, Inc., a Delaware corporation.
KHL Agreement shall mean KHL Agreement dated the Closing Date and executed
and delivered by KHL in respect of its obligations to the Agent and the
Banks.
Labor Contracts shall mean all employment agreements, employment contracts,
collective bargaining agreements and other agreements among any Loan Party or
Subsidiary of a Loan Party and its employees.
Law shall mean any law (including common law), constitution, statute, treaty,
regulation, rule, ordinance, opinion, release, ruling, order, injunction,
writ, decree, bond, judgment, authorization or approval, lien or award of or
settlement agreement with any Official Body.
Letter of Credit shall have the meaning assigned to that term in Section
2.9.1 (Issuance of Letters of Credit).
Letter of Credit Bank shall have the meaning assigned to that term in Section
2.9.1 (Issuance of Letters of Credit).
Letter of Credit Borrowing shall have the meaning assigned to such term in
Section 2.9.3.4 (Disbursements, Reimbursement).
Letter of Credit Fee shall have the meaning assigned to that term in Section
2.9.2 (Letter of Credit Fees).
Letter of Credit Outstandings shall mean at any time the sum of (i) the
aggregate undrawn face amount of outstanding Letters of Credit and (ii) the
aggregate amount of all unpaid and outstanding Reimbursement Obligations and
Letter of Credit Borrowings.
LIBO-Rate shall mean, with respect to the Loans comprising any Borrowing
Tranche to which the LIBO-Rate Option applies for any Interest Period, the
interest rate per annum determined by the Agent by dividing (the resulting
quotient rounded upwards, if necessary, to the nearest 1/100th of 1% per
annum) (i) the rate of interest determined by the Agent in accordance with
its usual procedures (which determination shall be conclusive absent manifest
error) to be the average of the London interbank offered rates for U.S.
Dollars quoted by the British Bankers' Association as set forth on Dow Xxxxx
Markets Service (formerly known as Telerate) (or appropriate successor or, if
the British Bankers' Association or its successor ceases to provide such
quotes, a comparable replacement determined by the Agent) display page 3750
(or such other display page on the Dow Xxxxx Markets Service system as may
replace display page 3750) two (2) Business Days prior to the first day of
such Interest Period for an amount comparable to such Borrowing Tranche and
having a borrowing date and a maturity comparable to such Interest Period by
(ii) a number equal to 1.00 minus the LIBO-Rate Reserve Percentage. The
LIBO-Rate may also be expressed by the following formula:
LIBO-Rate = Average of London interbank offered rates quoted by BBA
or appropriate successor as shown on Dow Xxxxx Markets Service display
page 3750 1.00 - LIBO-Rate Reserve Percentage
The LIBO-Rate shall be adjusted with respect to any Loan to which the LIBO-
Rate Option applies that is outstanding on the effective date of any change
in the LIBO-Rate Reserve Percentage as of such effective date. The Agent
shall give prompt notice to the Borrower of the LIBO-Rate as determined or
adjusted in accordance herewith, which determination shall be conclusive
absent manifest error.
LIBO-Rate Option shall mean the Revolving Credit LIBO-Rate Option.
LIBO-Rate Reserve Percentage shall mean as of any day the maximum percentage
in effect on such day, as prescribed by the Board of Governors of the Federal
Reserve System (or any successor) for determining the reserve requirements
(including supplemental, marginal and emergency reserve requirements) with
respect to eurocurrency funding (currently referred to as "Eurocurrency
Liabilities").
Lien shall mean any mortgage, deed of trust, pledge, lien, security interest,
charge or other encumbrance or security arrangement of any nature whatsoever,
whether voluntarily or involuntarily given, including any conditional sale or
title retention arrangement, and any assignment, deposit arrangement or lease
intended as, or having the effect of, security.
LLC Interests shall have the meaning given to such term in Section 7.3.9
(Update Regarding Subsidiary Matters).
Loan Documents shall mean this Agreement, the Agent's Letter, the Notes, the
Stock Pledge, the Guaranty Agreement, the KHL Agreement, and any other
instruments, certificates or documents delivered or contemplated to be
delivered hereunder or thereunder or in connection herewith or therewith, as
the same may be supplemented or amended from time to time in accordance
herewith or therewith, and Loan Document shall mean any of the Loan
Documents.
Loan Parties shall mean the Borrower, the Guarantors and KHL.
Loan Request shall have the meaning assigned to that term in Section 2.5
(Revolving Credit Loan Requests; Swing Loan Requests).
Loans shall mean collectively all Revolving Credit Loans and Swing Loans and
Loan shall mean separately, any Revolving Credit Loan or Swing Loan.
Material Adverse Change shall mean any set of circumstances or events which
(a)has or could reasonably be expected to have any material adverse effect
whatsoever upon the validity or enforceability of this Agreement or any other
Loan Document, (b)is or could reasonably be expected to be material and
adverse to the business, properties, assets, financial condition, results of
operations or business prospects of the Loan Parties taken as a whole,
(c)impairs materially or could reasonably be expected to impair materially
the ability of the Loan Parties taken as a whole to duly and punctually pay
or perform their material Indebtedness for borrowed money, or (d)impairs
materially or could reasonably be expected to impair materially the ability
of the Agent or any of the Banks, to the extent permitted, to enforce their
legal remedies pursuant to this Agreement or the Notes, the Stock Pledge or
the Guaranty Agreement.
Month, with respect to an Interest Period under the LIBO-Rate Option, shall
mean the interval between the days in consecutive calendar months numerically
corresponding to the first day of such Interest Period. If any LIBO-Rate
Interest Period begins on a day of a calendar month for which there is no
numerically corresponding day in the month in which such Interest Period is
to end, the final month of such Interest Period shall be deemed to end on the
last Business Day of such final month.
Moody's shall mean Xxxxx'x Investors Service, Inc. and its successors.
Mortgage Subsidiary shall mean each Subsidiary which is in the business of
making residential mortgage loans. Each of the Mortgage Subsidiaries as of
the Closing Date is listed on Schedule 1.1(C).
Multiemployer Plan shall mean any employee benefit plan which is a
"multiemployer plan" within the meaning of Section 4001(a)(3) of ERISA.
Non-approving Bank shall have the meaning assigned to such term in Section
2.10.2 (Approval by 80% Banks).
Non-Restricted Person shall mean any (i) Joint Venture and (ii) Subsidiary of
Hovnanian which is not a Restricted Subsidiary. Each of the Non-Restricted
Persons as of the Closing Date is listed on Schedule 1.1(C).
Notes shall mean the Revolving Credit Notes and the Swing Note.
Notices shall have the meaning assigned to that term in Section 10.6
(Notices).
Obligation shall mean any obligation or liability of any of the Loan Parties
to the Agent or any of the Banks, howsoever created, arising or evidenced,
whether direct or indirect, absolute or contingent, now or hereafter
existing, or due or to become due, under or in connection with this
Agreement, any Notes, the Letters of Credit, the Agent's Letter or any other
Loan Document.
Official Body shall mean any national, federal, state, local or other
government or political subdivision or any agency, authority, board, bureau,
central bank, commission, department or instrumentality of either, or any
court, tribunal, grand jury or arbitrator, in each case whether foreign or
domestic.
Participation Advance shall mean, with respect to any Bank, such Bank's
payment in respect of its participation in a Letter of Credit Borrowing
according to its Ratable Share pursuant to Section 2.9.4 (Repayment of
Participation Advances).
Partnership Interests shall have the meaning given to such term in 7.3.9.
(Update Regarding Subsidiary Matters).
PBGC shall mean the Pension Benefit Guaranty Corporation established pursuant
to Subtitle A of Title IV of ERISA or any successor.
Permitted Acquisitions shall have the meaning assigned to such term in
Section 7.2.4 (Liquidations, Mergers, Consolidations, Acquisitions).
Permitted Investments shall mean a Loan Party's Investment in:
(a) (i) cash, marketable direct obligations of the United States of
America or any agency thereof, and certificates of deposit, demand deposits,
time deposits, or repurchase agreements issued by any bank with a capital and
surplus of at least $25,000,000 organized under the laws of the United States
of America or any state thereof, provided that such obligations, certificates
of deposit, demand deposits, time deposits, and repurchase agreements have a
maturity of less than one year from the date of purchase;
(ii) investment grade commercial paper or debt having a maturity date of one
year or less from the date of purchase; and
(iii) funds holding assets primarily consisting of those described in clause
(i) hereof;
(b) loans or advances to employees of a Loan Party in the ordinary course of
business;
(c) any Person that is or concurrently becomes a
Loan Party;
(d) purchase money notes not exceeding $5,000,000 principal amount in the
aggregate received incident to sales of property by a Restricted Subsidiary;
(e) trade credit extended on usual and customary terms in the ordinary
course of business;
(f) loans to officers and directors to the extent permitted by Section
7.2.6.2 (Restricted Payment; Restricted Investments);
(g) marketable securities costing at the time of purchase no more than
$3,000,000 in the aggregate of any one or more residential real estate
developers and which are registered under the Securities Exchange Act of
1934; and
(h) other Investments not in excess of $5,000,000 in the aggregate.
Permitted Liens shall mean:
(i) Liens for taxes, assessments or other governmental charges not yet
payable or being contested in good faith and as to which adequate reserves
shall have been established in accordance with GAAP;
(ii) Pledges or deposits made in the ordinary course of business to secure
payment of workers' compensation, or to participate in any fund in connection
with workers' compensation, unemployment insurance, old-age pensions or other
social security programs;
(iii) Mechanics, materialmens, warehousemens, carriers or other like liens
arising in the ordinary course of business securing obligations which are not
overdue for a period longer than 30 days or which are being contested in good
faith by appropriate proceedings;
(iv) Good-faith pledges or deposits made in the ordinary course of business
to secure performance of bids, tenders, contracts (other than for the
repayment of borrowed money) or leases, not in excess of the aggregate amount
due thereunder, or to secure statutory obligations, or surety, appeal,
indemnity, performance or other similar bonds required in the ordinary course
of business;
(v) Encumbrances consisting of zoning restrictions, easements or other
restrictions on the use of real property, none of which materially impairs
the use of such property or the value thereof, and none of which is violated
in any material respect by existing or proposed structures or land use;
(vi) Liens, security interests and mortgages in favor of the Agent for the
benefit of the Banks;
(vii) Liens on property leased by any Loan Party or Subsidiary of a Loan
Party under capital and operating leases not prohibited by this Agreement
securing obligations of such Loan Party or Subsidiary to the lessor under
such leases;
(viii) Any Lien existing on the date of this Agreement and described on
Schedule 1.1(P), provided that the principal amount secured thereby is not
hereafter increased, and no additional assets become subject to such Lien;
(ix) Purchase Money Mortgages and Purchase Money Security Interests and
Liens on real property owned and occupied by Hovnanian or any Subsidiary; and
(x) The following, (A)if the validity or amount thereof is being contested
in good faith by appropriate and lawful proceedings diligently conducted so
long as levy and execution thereon have been stayed and continue to be stayed
or (B)if a final judgment is entered and such judgment is discharged within
thirty (30) days of entry, and they do not in the aggregate materially impair
the ability of any Loan Party to perform its Obligations hereunder or under
the other Loan Documents:
(1) Claims or Liens for taxes, assessments or charges due and payable and
subject to interest or penalty, provided that the applicable Loan Party
maintains such reserves or other appropriate provisions as shall be required
by GAAP and pays all such taxes, assessments or charges forthwith upon the
commencement of proceedings to foreclose any such Lien;
(2) Claims, Liens or encumbrances upon, and defects of title to, real or
personal property, including any attachment of personal or real property or
other legal process prior to adjudication of a dispute on the merits;
(3) Claims or Liens of mechanics, materialmen, warehousemen, carriers, or
other statutory nonconsensual Liens; or
(4) Liens resulting from final judgments or orders described in Section
8.1.6 (Final Judgments or Orders).
(xi) Other Liens securing obligations not in excess of $5,000,000 in the
aggregate.
Person shall mean any individual, corporation, partnership, limited liability
company, association, joint-stock company, trust, unincorporated
organization, joint venture, government or political subdivision or agency
thereof, or any other entity.
Plan shall mean at any time an employee pension benefit plan (other than a
Multiemployer Plan) which is covered by Title IV of ERISA or is subject to
the minimum funding standards under Section 412 of the Internal Revenue Code
in respect of which the Borrower or any member of the ERISA Group is an
"employer" as defined in Section 3(5) of ERISA.
PNC Bank shall mean PNC Bank, National Association, its successors and
assigns.
Potential Default shall mean any event or condition which with notice,
passage of time or a determination by the Agent or the Required Banks, or any
combination of the foregoing, would constitute an Event of Default.
Preliminary Approvals shall mean the following: (i) in New Jersey, as
defined in the Municipal Land Use Law (N.J.S.A. 40:55D-1 et seq.) and (ii)
for states other than New Jersey, a point in time equivalent thereto.
Principal Office shall mean the main banking office of the Agent in
Pittsburgh, Pennsylvania or such other location so designated by the Agent.
Prohibited Transaction shall mean any prohibited transaction as defined in
Section 4975 of the Internal Revenue Code or Section 406 of ERISA for which
neither an individual nor a class exemption has been issued by the United
States Department of Labor.
Property shall mean all real property, both owned and leased, of any Loan
Party or Subsidiary of a Loan Party.
Purchase Money Mortgage shall mean any non-recourse mortgages granted to
secure Indebtedness of any Loan Party.
Purchase Money Security Interest shall mean Liens upon tangible personal
property securing loans to any Loan Party or deferred payments by such Loan
Party or Subsidiary for the purchase of such tangible personal property and
excluding Purchase Money Mortgages.
Purchasing Bank shall mean a Bank which becomes a party to this Agreement by
executing an Assignment and Assumption Agreement.
Ratable Share shall mean the proportion that a Bank's Commitment (excluding
the Swing Loan Commitment) bears to the Commitments (excluding the Swing Loan
Commitment) of all of the Banks.
Regulated Substances shall mean, without limitation, any substance, material
or waste, regardless of its form or nature, defined under Environmental Laws
as a "hazardous substance," "pollutant," "pollution," "contaminant,"
"hazardous or toxic substance," "extremely hazardous substance," "toxic
chemical," "toxic substance," "toxic waste," "hazardous waste," "special
handling waste," "industrial waste," "residual waste," "solid waste,"
"municipal waste," "mixed waste," "infectious waste," "chemotherapeutic
waste," "medical waste," or "regulated substance" or any other material,
substance or waste, regardless of its form or nature, which otherwise is
regulated by Environmental Laws.
Regulation U shall mean Regulation U, T or X as promulgated by the Board of
Governors of the Federal Reserve System, as amended from time to time.
Reimbursement Obligation shall mean the obligation of the Borrower to
reimburse a Letter of Credit Bank for draws under a Letter of Credit issued
by such Bank under this Agreement, except to the extent such obligation is
represented by a Revolving Credit Loan.
Reportable Event shall mean a reportable event described in Section 4043 of
ERISA and regulations thereunder with respect to a Plan other than those
events as to which the 30-day notice is waived under the PBGC regulations.
Required Banks shall mean
(i) if there are no Loans, Reimbursement Obligations or Letter of Credit
Borrowings outstanding, Banks whose Commitments (excluding the Swing Loan
Commitments) aggregate at least 66 2/3% of the Revolving Credit Commitments
of all of the Banks, or
(ii) if there are Loans, Reimbursement Obligations, or Letter of Credit
Borrowings outstanding, any Bank or group of Banks if the sum of the Loans
(excluding the Swing Loans), Reimbursement Obligations and Letter of Credit
Borrowings of such Banks then outstanding aggregates at least 66 2/3% of the
total principal amount of all of the Loans (excluding the Swing Loans),
Reimbursement Obligations and Letter of Credit Borrowings then outstanding.
Reimbursement Obligations and Letter of Credit Borrowings shall be deemed,
for purposes of this definition, to be in favor of the Agent and not a
participating Bank if such Bank has not made its Participation Advance in
respect thereof and shall be deemed to be in favor of such Bank to the extent
of its Participation Advance if it has made its Participation Advance in
respect thereof.
Required Environmental Notices shall mean all notices, reports, plans, forms
or other filings which pursuant to Environmental Laws, Required Environmental
Permits or at the request or direction of an Official Body either must be
submitted to an Official Body or which otherwise must be maintained.
Required Environmental Permits shall mean all permits, licenses, bonds,
consents, programs, approvals or authorizations required under Environmental
Laws to own, occupy or maintain the Property or which otherwise are required
for the operations and business activities of the Loan Parties.
Required Share shall have the meaning assigned to such term in Section 4.8
[Settlement Date Procedures].
Restricted Investment shall mean a Loan Party's Investment that constitutes
a Subsidiary Investment in any Non-Restricted Person or any Investment in
Related Business.
Restricted Payments shall mean
(i) Dividends and Capital Stock Retirement payments after January 31, 2001
by Hovnanian or otherwise to the shareholders of Hovnanian; and
(ii) Payments (whether in the form of principal payments, note repurchases
or similar items) to the holder of Subordinated Debt made on or after January
31, 2001; provided, however, with respect to this item (ii), a refinancing of
the Subordinated Debt to the extent consisting of the repayment of the
Subordinated Debt and the incurring of new "Subordinated Debt" within 60 days
of such repayment shall not constitute a "Restricted Payment".
Restricted Subsidiaries shall mean any Subsidiary that has not been
designated a Non-Restricted Person as of the Closing Date or in accordance
with Section 2.11 (Designation of Subsidiaries and Release of Guarantors.
Each of the Restricted Subsidiaries as of the Closing Date is listed on
Schedule 1.1(C).
Revolving Credit Base Rate Option shall mean the option of the Borrower to
have Revolving Credit Loans bear interest at the rate and under the terms and
conditions set forth in Section 3.1.1((i)) (Revolving Credit Base Rate
Option).
Revolving Credit Commitment shall mean, as to any Bank at any time, the
amount set forth opposite its name on Schedule 1.1(B) in the column labeled
"Amount of Commitment for Revolving Credit Loans" or on Schedule I to the
Assignment and Assumption Agreement pursuant to which such Bank became a
party hereto, and Revolving Credit Commitments shall mean the aggregate
Revolving Credit Commitments of all of the Banks. The Revolving Credit
Commitments shall not exceed at any time $440,000,000.
Revolving Credit LIBO-Rate Option shall mean the option of the Borrower to
have Revolving Credit Loans bear interest at the rate and under the terms and
conditions set forth in Section 3.1.1((ii)) (Revolving Credit LIBO-Rate
Option).
Revolving Credit Loans shall mean collectively and Revolving Credit Loan
shall mean separately all Revolving Credit Loans or any Revolving Credit Loan
made by the Banks or one of the Banks to the Borrower pursuant to Section 2.1
(Revolving Credit Commitments) or 2.9.3 (Disbursements, Reimbursement).
Revolving Credit Note shall mean any Revolving Credit Note of the Borrower in
the form of Exhibit 1.1(R) issued by the Borrower at the request of a Bank
pursuant to Section 4.7 (Notes) evidencing the Revolving Credit Loans to such
Bank, together with all amendments, extensions, renewals, replacements,
refinancings or refundings thereof in whole or in part.
Revolving Facility Usage shall mean at any time the sum of the Revolving
Credit Loans outstanding and the Letter of Credit Outstandings.
SEC shall mean the Securities and Exchange Commission or any governmental
agencies substituted therefor.
Senior Homebuilding Indebtedness shall mean the sum (without duplication) of
(a) outstanding principal amount of the Obligations, (b) letters of credit
(whether or not issued under this Agreement), (c) Guaranties by any Loan
Party of any obligation of any Person which is not a Restricted Subsidiary or
Hovnanian, (d) Senior Notes, (e) surety bonds (or similar products) issued by
bonding companies in lieu of cash payments or cash deposits on contracts for
any Loan Party to acquire land inventory in respect of which a Loan Party is
obligated and (f) other Indebtedness of Hovnanian or a Restricted Subsidiary
which is permitted under this Agreement; provided however, that "Senior
Homebuilding Indebtedness" shall not include (i) obligations of Hovnanian
under the Keep-Well Guaranty dated July 16, 2001 previously provided to Bank
One, NA, as agent for the benefit of X. Xxxxxxxxx Mortgage Inc., (ii) debt
secured by Purchase Money Security Interests and Purchase Money Mortgages and
(iii) Subordinated Debt.
Senior Notes shall mean the (i) $150,000,000 principal amount 10 1/2% Senior
Notes of the Borrower and guaranteed by Hovnanian due October 2007 and (ii)
$150,000,000 9 1/8% Senior Notes of the Borrower and guaranteed by Hovnanian
due in April 2009 and (iii) other notes sold or guaranteed by Hovnanian or
the Borrower from time to time after the Closing Date on terms not materially
less favorable to the Banks (as determined by the Agent) as those described
in clauses (i) and (ii) above
Settlement Date shall mean the date selected from time to time by the Agent
(after consulting the Borrower) on which the Agents elects to effect
settlement pursuant to Section 4.8 (Settlement Date Procedures).
Sold Homes shall mean the Dollar amount of the capitalized construction costs
of any Dwelling Unit upon which a third party purchaser has paid a cash
deposit pursuant to an enforceable agreement of sale. Such cost shall
include the proportional costs of the land under the Dwelling Unit, site
improvements and soft costs incurred to date.
Standard & Poor's shall mean Standard & Poor's Ratings Services, a division
of The XxXxxx-Xxxx Companies, Inc., and its successors.
Stock Pledge shall mean the Stock Pledge Agreement dated the Closing Date
pursuant to which Hovnanian pledges to the Agent on behalf of the Banks 100%
of the capital stock of KHL as security for the Obligations.
Subordinated Debt shall mean (i) the $100,000,000 principal amount 9 3/4%
Subordinated Notes of the Borrower due June 1, 2005, and (ii) any other
unsecured indebtedness of the Borrower, Hovnanian, or any other Loan Party
which is subordinated by its terms to the prior payment in full of the
Obligations evidenced by this Agreement, the Notes and the Letters of Credit,
as may be outstanding from time to time, in a manner no less favorable to the
Banks than the terms of the Subordinated Debt described in clause (i) above
and which contain covenants that are not materially less favorable to
Hovnanian, the Borrower or any other Loan Party than those contained in the
Subordinated Debt described in clause (i) above.
Subsidiary of any Person at any time, shall mean a corporation, partnership,
limited liability company or other entity (x) whose assets and liabilities
are consolidated with Hovnanian in accordance with GAAP and (y) of which
shares of stock or other ownership interests having ordinary voting power
(other than stock or such other ownership interests having such power only by
reason of the happening of a contingency) to elect a majority of the board of
directors or other managers of such corporation, partnership or other entity
are at the time owned, or the management of which is otherwise controlled,
directly or indirectly through one or more intermediaries, or both, by such
Person. Unless otherwise qualified, all references to a "Subsidiary" or to
"Subsidiaries" in this Agreement shall refer to a Subsidiary or Subsidiaries
of Hovnanian.
Subsidiary Investment shall mean with respect to any Subsidiary or Joint
Venture the sum of (x) loans to such Person by Hovnanian or a Restricted
Subsidiary and (y) Hovnanian's or a Restricted Subsidiary's share of equity
in such Person.
Subsidiary Shares shall have the meaning assigned to that term in Section
7.3.9 (Update Regarding Subsidiary Matters).
Swing Loan Commitment shall mean PNC Bank's commitment to make Swing Loans to
the Borrower pursuant to Section 2.1.2 (Swing Loan Commitment) hereof in an
aggregate principal amount of up to $10,000,000.
Swing Loan Note shall mean the Swing Loan Note of the Borrower in the form of
Exhibit 1.1(S) evidencing the Swing Loans, together with all amendments,
extensions, renewals, replacements, refinancings or refundings thereof in
whole or in part.
Swing Loan Request shall mean a request for Swing Loans made in accordance
with Section 2.4.2 (Swing Loan Requests) hereof.
Swing Loans shall mean collectively and Swing Loan shall mean separately all
Swing Loans or any Swing Loan made by PNC Bank to the Borrower pursuant to
Section 2.1.2 (Swing Loan Commitment) hereof.
Total Debt Multiplier shall mean 2.40, subject to adjustment as described in
this definition.
(a) Total Debt Multiplier shall not at any time be greater than 2.40 and
shall decrease (under circumstances described below) to 2.05 and then 1.95
and so forth in increments of 10 basis points; similarly, at any time Total
Debt Multiplier shall increase (under circumstances described below) it shall
increase in 10 basis point increments up to 2.05 and then from 2.05 to 2.40.
Such decreases and increases shall occur as follows, with reference to the
Fixed Charge Coverage Ratio, but only when Actual Leverage is less than or
equal to 2.2-to-1.0.
(b) If the Fixed Charge Coverage Ratio is less than 1.25-to-1.0 for two (2)
consecutive quarters (for purposes hereof the "reference quarters"):
(i) then for the second of such quarters Total Debt Multiplier shall reduce
to 2.05; and
(ii) for the next such quarter after the reference quarters, and each
subsequent consecutive quarter in which the Fixed Charge Coverage Ratio is
less than 1.25-to-1.0, Total Debt Multiplier shall reduce for each such
quarter in the increments described in subsection (a) of this definition.
(c) If the Fixed Charge Ratio equals or exceeds 1.25-to-1.0 for any quarter
after the two (2) reference quarters, then Total Debt Multiplier shall
increase for such quarters in the increments described in subsection (a) of
this definition.
Transferor Bank shall mean the selling Bank pursuant to an Assignment and
Assumption Agreement.
Unimproved Land shall mean the Dollar value of land which has not been
granted Preliminary Approvals, calculated at the lower of (x) the actual cost
(including land costs and capital expenses relating thereto) or (y) the
market value (as determined in accordance with GAAP) thereof.
Unsold Dwelling Units shall mean the number of Dwelling Units comprising from
time to time "Unsold Homes".
Unsold Homes shall mean the Dollar amount of capitalized construction costs
of any Dwelling Unit being built for which the construction of slab (or
foundation) has been completed and upon which no cash deposit has been paid
pursuant to an enforceable agreement of sale. Such Dollar amount shall
include the proportional costs of the land under the Dwelling Unit, site
improvements and soft costs actually incurred to date.
1.2 Construction.
Unless the context of this Agreement otherwise clearly requires, the
following rules of construction shall apply to this Agreement and each of the
other Loan Documents:
1.2.1. Number; Inclusion.
references to the plural include the singular, the plural, the part and the
whole; "or" has the inclusive meaning represented by the phrase "and/or," and
"including" has the meaning represented by the phrase "including without
limitation";
1.2.2. Determination.
references to "determination" of or by the Agent or the Banks shall be deemed
to include good-faith estimates by the Agent or the Banks (in the case of
quantitative determinations) and good-faith beliefs by the Agent or the Banks
(in the case of qualitative determinations) and such determination shall be
conclusive absent manifest error;
1.2.3. Agent's Discretion and Consent.
whenever the Agent or the Banks are granted the right herein to act in its or
their sole discretion or to grant or withhold consent such right shall be
exercised in good faith;
1.2.4. Documents Taken as a Whole.
the words "hereof," "herein," "hereunder," "hereto" and similar terms in this
Agreement or any other Loan Document refer to this Agreement or such other
Loan Document as a whole and not to any particular provision of this
Agreement or such other Loan Document;
1.2.5. Headings.
the section and other headings contained in this Agreement or such other Loan
Document and the Table of Contents (if any) preceding this Agreement or such
other Loan Document are for reference purposes only and shall not control or
affect the construction of this Agreement or such other Loan Document or the
interpretation thereof in any respect;
1.2.6. Implied References to this Agreement.
article, section, subsection, clause, schedule and exhibit references are to
this Agreement or other Loan Document, as the case may be, unless otherwise
specified;
1.2.7. Persons.
reference to any Person includes such Person's successors and assigns but, if
applicable, only if such successors and assigns are permitted by this
Agreement or such other Loan Document, as the case may be, and reference to a
Person in a particular capacity excludes such Person in any other capacity;
1.2.8. Modifications to Documents.
reference to any agreement (including this Agreement and any other Loan
Document together with the schedules and exhibits hereto or thereto),
document or instrument means such agreement, document or instrument as
amended, modified, replaced, substituted for, superseded or restated;
1.2.9. From, To and Through.
relative to the determination of any period of time, "from" means "from and
including," "to" means "to but excluding," and "through" means "through and
including"; and
1.2.10. Shall; Will.
references to "shall" and "will" are intended to have the same meaning.
1.3 Accounting Principles.
Except as otherwise provided in this Agreement, all computations and
determinations as to accounting or financial matters and all financial
statements to be delivered pursuant to this Agreement shall be made and
prepared in accordance with GAAP (including principles of consolidation where
appropriate), and all accounting or financial terms shall have the meanings
ascribed to such terms by GAAP; provided, however, that all accounting terms
used in Section 7.2 (Negative Covenants) (and all defined terms used in the
definition of any accounting term used in Section 7.2 (Negative Covenants)
shall have the meaning given to such terms (and defined terms) under GAAP as
in effect on the date hereof applied on a basis consistent with those used in
preparing the Annual Statements referred to in Section 5.1.8((i)) (Historical
Statements). In the event of any change after the date hereof in GAAP, and
if such change would result in the inability to determine compliance with the
financial covenants set forth in Section 7.2 (Negative Covenants) based upon
the Loan Parties' regularly prepared financial statements by reason of the
preceding sentence, then the parties hereto agree to endeavor, in good faith,
to agree upon an amendment to this Agreement that would adjust such financial
covenants in a manner that would not affect the substance thereof, but would
allow compliance therewith to be determined in accordance with the Loan
Parties' financial statements at that time.
2. REVOLVING CREDIT AND SWING LOAN FACILITIES
2.1 Revolving Credit Commitments.
2.1.1. Revolving Credit Loans.
Subject to the terms and conditions hereof and relying upon the
representations and warranties herein set forth, each Bank severally agrees
to make Revolving Credit Loans to the Borrower at any time or from time to
time on or after the date hereof to the Expiration Date provided that after
giving effect to such Loan the aggregate amount of Revolving Credit Loans
from such Bank shall not exceed such Bank's Revolving Credit Commitment minus
such Bank's Ratable Share of the Letter of Credit Outstandings. Within such
limits of time and amount and subject to the other provisions of this
Agreement, the Borrower may borrow, repay and reborrow pursuant to this
Section 2.1.
2.1.2. Swing Loan Commitment.
Subject to the terms and conditions hereof and relying upon the
representations and warranties herein set forth, PNC Bank shall make swing
loans (the "Swing Loans") to the Borrower at any time or from time to time
after the date hereof to, but not including, the Expiration Date, in an
aggregate principal amount up to but not in excess of the Swing Loan
Commitment. The Swing Loan Commitment is a sublimit of the Revolving Credit
Commitments and the aggregate principal amount of the Swing Loans, the
Revolving Credit Loans and the Letter of Credit Outstandings of all the Banks
at any one time outstanding shall not exceed the Revolving Credit Commitments
of all the Banks. Within such limits of time and amount and subject to the
other provisions of this Agreement, the Borrower may borrow, repay and
reborrow pursuant to this Section 2.1.2. Swing Loans shall, at the option of
PNC Bank after consultation with the Borrower, be repaid by the proceeds of a
Revolving Credit Loan deemed to have been made for such purpose pursuant to
Section 2.8 (Borrowings to Repay Swing Loans) and shall be subject to the
provisions of Section 4.8 (Settlement Date Procedures).
2.1.3. Increase in Commitments After Closing Date.
Borrower may request at any time after the Closing Date that a new lender
join this Agreement as a "Bank". The selection of such new Bank shall be
subject to the Borrower's and Agent's consent, which shall not be
unreasonably withheld. The new Bank shall join this Agreement as a Bank
pursuant to the procedures contained in Section 10.11(b) (Additional Bank).
The Revolving Credit Commitments shall not exceed the Dollar limit set forth
in the definition thereof.
2.1.4. Voluntary Reduction of Commitment.
The Borrower shall have the right at any time after the Closing Date (i) upon
five (5) days' prior written notice to the Agent to permanently reduce the
Revolving Credit Commitments, in a minimum amount of $500,000 and whole
multiples of $100,000 (provided that in no event shall the aggregate
Revolving Credit Commitments be reduced to an amount less than $220,000,000)
or (ii) at any time upon prepayment in full of the Obligations, terminate
completely the Commitments, without penalty or premium except as hereinafter
set forth, provided that any such reduction or termination shall be
accompanied by prepayment of the Notes, together with outstanding Commitment
Fees, and the full amount of interest accrued on the principal sum to be
prepaid (and all amounts referred to in Section 4.6.2 [Indemnity] hereof), to
the extent that the aggregate amount thereof then outstanding exceeds the
Commitments as so reduced or terminated. Any notice to reduce the Revolving
Credit Commitments under this Section 2.1.4 shall be irrevocable.
2.2 Nature of Banks' Obligations with Respect to Revolving Credit
Loans.
Each Bank shall be obligated to participate in each request for Revolving
Credit Loans pursuant to Section 2.4 (Revolving Credit Loan Requests; Swing
Loan Requests) in accordance with its Ratable Share. The aggregate of each
Bank's Revolving Credit Loans outstanding hereunder to the Borrower at any
time shall never exceed its Revolving Credit Commitment minus its Ratable
Share of the Letter of Credit Outstandings. The obligations of each Bank
hereunder are several. The failure of any Bank to perform its obligations
hereunder shall not affect the Obligations of the Borrower to any other party
nor shall any other party be liable for the failure of such Bank to perform
its obligations hereunder. The Banks shall have no obligation to make
Revolving Credit Loans hereunder on or after the Expiration Date.
2.3 Commitment Fees.
Accruing from the date hereof until the Expiration Date, the Borrower agrees
to pay to the Agent for the account of each Bank, as consideration for such
Bank's Revolving Credit Commitment hereunder, a nonrefundable commitment fee
(the "Commitment Fee") equal to the Applicable Commitment Fee Rate (computed
on the basis of a year of 365 or 366 days, as the case may be, and actual
days elapsed) on the average daily difference between the amount of (i)such
Bank's Revolving Credit Commitment as the same may be constituted from time
to time and the (ii)the sum of such Bank's Revolving Credit Loans outstanding
(plus, in the case of PNC Bank, its Swing Loans outstanding) plus its Ratable
Share of Letter of Credit Outstandings. All Commitment Fees shall be payable
in arrears on the fifteenth (15) day of each calendar quarter after the date
hereof and on the Expiration Date or upon acceleration of the Obligations.
2.4 Revolving Credit Loan Requests; Swing Loan Requests.
2.4.1. Revolving Credit Loan Requests.
Except as otherwise provided herein, the Borrower may from time to time prior
to the Expiration Date request the Banks to make Revolving Credit Loans, or
renew or convert the Interest Rate Option applicable to existing Revolving
Credit Loans or pursuant to Section 3.2 (Interest Periods), by delivering to
the Agent, not later than 11:00 a.m., Eastern time, (i)three (3) Business
Days prior to the proposed Borrowing Date with respect to the making of
Revolving Credit Loans to which the LIBO-Rate Option applies or the
conversion to or the renewal of the LIBO-Rate Option for any Loans; and (ii)
on the day of either the proposed Borrowing Date with respect to the making
of a Revolving Credit Loan to which the Base Rate Option applies or the last
day of the preceding Interest Period with respect to the conversion to the
Base Rate Option for any Loan, of a duly completed request therefor
substantially in the form of Exhibit 2.4.1 or a request by telephone promptly
confirmed in writing by letter or facsimile in such form (each, a "Loan
Request"), it being understood that the Agent may rely on the authority of
any individual making such a telephonic request without the necessity of
receipt of such written confirmation. Each Loan Request shall be irrevocable
and shall specify (i)the proposed Borrowing Date; (ii)the aggregate amount of
the proposed Loans comprising each Borrowing Tranche, which shall be in
integral multiples of $ 500,000 and not less than $2,500,000 for each
Borrowing Tranche to which the LIBO-Rate Option applies and which shall be in
integral multiples of $100,000 and not less than $500,000 for Borrowing
Tranches to which the Base Rate Option applies; (iii)whether the LIBO-Rate
Option or Base Rate Option shall apply to the proposed Loans comprising the
applicable Borrowing Tranche; and (iv)in the case of a Borrowing Tranche to
which the LIBO-Rate Option applies, an appropriate Interest Period for the
Loans comprising such Borrowing Tranche.
2.4.2. Swing Loan Requests.
Except as otherwise provided herein, the Borrower may from time to time prior
to the Expiration Date request PNC Bank to make Swing Loans by delivery to
PNC Bank not later than 2:00 p.m. Eastern time on the proposed Borrowing Date
of a duly completed request therefor substantially in the form of Exhibit
2.4.2 hereto or a request by telephone promptly confirmed in writing by
letter or facsimile (each, a "Swing Loan Request"), it being understood that
the Agent may rely on the authority of any individual making such a
telephonic request without the necessity of receipt of such written
confirmation. Each Swing Loan Request shall be irrevocable and shall specify
the proposed Borrowing Date and the principal amount of such Swing Loan,
which shall be not less than $100,000.
2.5 Making Revolving Credit Loans and Swing Loans.
2.5.1. Generally.
The Agent shall, promptly after receipt by it of a Loan Request pursuant to
Section 2.4.1 (Revolving Credit Loan Requests), but not later than 12:00
noon, notify the Banks of its receipt of such Loan Request specifying:
(i)the proposed Borrowing Date and the time and method of disbursement of the
Revolving Credit Loans requested thereby; (ii)the amount and type of each
such Revolving Credit Loan and the applicable Interest Period (if any); and
(iii)the apportionment among the Banks of such Revolving Credit Loans as
determined by the Agent in accordance with Section 2.2 [Nature of Banks'
Obligations with Respect to Revolving Credit Loans]. Each Bank shall remit
the principal amount of each Revolving Credit Loan to the Agent such that the
Agent is able to, and the Agent shall, to the extent the Banks have made
funds available to it for such purpose and subject to Section 6.2 (Each
Additional Loan or Letter of Credit), fund such Revolving Credit Loans to the
Borrower in U.S. Dollars and immediately available funds at the Principal
Office prior to 2:30 p.m., Eastern time, on the applicable Borrowing Date,
provided that if any Bank fails to remit such funds to the Agent in a timely
manner, the Agent may elect in its sole discretion to fund with its own funds
the Revolving Credit Loans of such Bank on such Borrowing Date, and such Bank
shall be subject to the repayment obligation in Section 9.16 (Availability of
Funds).
2.5.2. Making Swing Loans.
Subject to the other provisions of this Agreement, PNC Bank shall, after
receipt by it of a Swing Loan Request pursuant to Section 2.4.2 (Swing Loan
Requests), fund such Swing Loan to the Borrower in Dollars and immediately
available funds at the Principal Office as soon as reasonably practicable
after receipt by PNC Bank of said Swing Loan Request but in any event by the
close of business on the same Business Day.
2.6 Swing Loan Note.
The obligation of the Borrower to repay the unpaid principal amount of the
Swing Loans made to it by PNC Bank together with interest thereon shall, if
requested by PNC Bank, be evidenced by the Swing Loan Note dated the Closing
Date payable to the order of PNC Bank in a face amount equal to the Swing
Loan Commitment.
2.7 Use of Proceeds.
The proceeds of the Revolving Credit Loans shall be used to refinance
existing indebtedness and provide for Letters of Credit and provide working
capital and funds for general corporate purpose for the Borrower, Hovnanian
and the Restricted Subsidiaries, all in accordance with Section 7.1.10 (Use
of Proceeds).
2.8 Borrowings to Repay Swing Loans.
PNC Bank may, at its option, and upon consultation with the Borrower,
exercisable at any time for any reason whatsoever, demand that each Bank
shall make a Revolving Credit Loan in an amount equal to such Bank's Ratable
Share of the aggregate principal amount of the outstanding Swing Loans made
in accordance with Section 2.5.2 (Making Swing Loans), plus, if PNC Bank so
requests, accrued interest thereon, provided that no Bank shall be obligated
in any event to make Revolving Credit Loans in excess of its Revolving Credit
Commitment. Revolving Credit Loans made pursuant to the preceding sentence
shall bear interest at the Base Rate Option and shall be deemed to have been
properly requested in accordance with Section 2.4.1 (Revolving Credit Loan
Requests) without regard to any of the requirements of that provision. PNC
Bank shall provide notice to the Banks (which may be telephonic or written
notice by letter, facsimile or telex) that such Revolving Credit Loans are to
be made under this Section 2.8 and of the apportionment among the Banks, and
the Banks shall be unconditionally obligated to fund such Revolving Credit
Loans (whether or not the conditions specified in Section 2.4.1 (Revolving
Credit Loan Requests) or Section 6.2 (Each Additional Loan or Letter of
Credit) are then satisfied) by the time PNC Bank so requests, which shall not
be earlier than three o'clock (3:00) p.m. Eastern time on the Business Day
next after the date the Banks receive such notice from PNC Bank.
2.9 Letter of Credit Subfacility.
2.9.1. Issuance of Letters of Credit.
The Borrower may request the issuance of a letter of credit (each a "Letter
of Credit") on behalf of itself or another Loan Party by the Agent or any
Bank which issues a Letter of Credit hereunder (such Bank, with respect to
the issuance of the Letter of Credit so requested by the Borrower, being a
"Letter of Credit Bank") by delivering to the Agent and the Letter of Credit
Bank a completed application and agreement for letters of credit in such form
as the Letter of Credit Bank and the Agent may specify from time to time by
no later than 10:00 a.m., Eastern time, at least three (3) Business Days, or
such shorter period as may be agreed to by the Letter of Credit Bank, in
advance of the proposed date of issuance. Each letter of credit issued under
the Existing Facility on the Closing Date is described on Schedule 2.9.1 and
shall be deemed to be a "Letter of Credit" hereunder as of the Closing Date.
Subject to the terms and conditions hereof and in reliance on the agreements
of the other Banks set forth in this Section 2.9, the Letter of Credit Bank
will issue a Letter of Credit provided that each Letter of Credit shall in no
event expire later than one (1) Business Day prior to the Expiration Date and
providing that in no event shall the Letter of Credit Outstandings exceed, at
any one time, $80,000,000.
2.9.2. Letter of Credit Fees.
The Borrower shall pay (i)to the Agent for the ratable account of the Banks a
fee (the "Letter of Credit Fee") equal to the Applicable Letter of Credit Fee
Rate (computed on the daily average Letter of Credit Outstandings) and (ii)to
the Agent on behalf of each respective Letter of Credit Bank for its own
account a fronting fee for Letters of Credit issued by such Letter of Credit
Bank equal to .125% per annum (computed on the basis of a year of 365 or 366
days, as the case may be, and actual days elapsed) and shall be payable
quarterly in arrears commencing with the fifteenth (15) day of each calendar
quarter following issuance of each Letter of Credit and on the Expiration
Date. The Borrower shall also pay to the Letter of Credit Bank for the
Letter of Credit Bank's sole account the Letter of Credit Bank's then in
effect customary fees and administrative expenses payable with respect to the
Letters of Credit as the Letter of Credit Bank may generally charge or incur
from time to time in connection with the issuance, maintenance, modification
(if any), assignment or transfer (if any), negotiation, and administration of
Letters of Credit.
2.9.3. Disbursements, Reimbursement.
2.9.3.1 Immediately upon the issuance of each Letter of Credit, each Bank
shall be deemed to, and hereby irrevocably and unconditionally agrees to,
purchase from the Letter of Credit Bank a participation in such Letter of
Credit and each drawing thereunder in an amount equal to such Bank's Ratable
Share of the maximum amount available to be drawn under such Letter of Credit
and the amount of such drawing, respectively.
2.9.3.2 In the event of any request for a drawing on or before 11:00 a.m.
under a Letter of Credit by the beneficiary or transferee thereof, the Letter
of Credit Bank shall promptly notify the Agent upon such request. Provided
that it shall have received such notice, the Agent will promptly notify the
Borrower and each Bank thereof, and the Borrower shall be deemed to have
requested that Revolving Credit Loans be made by the Banks in an amount equal
to the amount so paid by the Letter of Credit Bank under the Base Rate Option
to be disbursed on the Drawing Date under such Letter of Credit, subject to
the amount of the unutilized portion of the Revolving Credit Commitment and
not subject to the conditions set forth in Section 6.2 (Each Additional Loan
or Letter of Credit). Any notice given by the Letter of Credit Bank or the
Agent pursuant to this Section 2.9.3.2 may be oral if immediately confirmed
in writing; provided that the lack of such an immediate confirmation shall
not affect the conclusiveness or binding effect of such notice.
2.9.3.3 Each Bank shall upon any notice pursuant to Section 2.9.3.2
(Disbursements, Reimbursement) make available to the Agent on behalf of the
Letter of Credit Bank an amount in immediately available funds equal to its
Ratable Share of the amount of the drawing, whereupon the participating Banks
shall (subject to Section 2.9.3.4 (Disbursements, Reimbursement)) each be
deemed to have made a Revolving Credit Loan under the Base Rate Option to the
Borrower in that amount. If any Bank so notified fails to make available to
the Agent for the account of the Agent on behalf of the Letter of Credit Bank
the amount of such Bank's Ratable Share of such amount by no later than two
o'clock (2:00) p.m., Eastern time on the Drawing Date, then interest shall
accrue on such Bank's obligation to make such payment from the Drawing Date
to the date on which such Bank makes such payment (i) at a rate per annum
equal to the Federal Funds Effective Rate during the first three days
following the Drawing Date and (ii) at a rate per annum equal to the rate
applicable to Loans under the Revolving Credit Base Rate Option on and after
the fourth day following the Drawing Date. The Agent will promptly give
notice of the occurrence of the Drawing Date, but failure of the Agent to
give any such notice on the Drawing Date or in sufficient time to enable any
Bank to effect such payment on such date shall not relieve such Bank from its
obligation under this Section 2.9.3.3.
2.9.3.4 With respect to any unreimbursed drawing that is not converted into
Revolving Credit Loans under the Base Rate Option to the Borrower in whole or
in part as contemplated by Section 2.9.3.2 (Disbursements, Reimbursement),
the Borrower shall be deemed to have incurred from the Agent a borrowing
(each a "Letter of Credit Borrowing") in the amount of such drawing. Such
Letter of Credit Borrowing shall be due and payable on demand (together with
interest) and shall bear interest at the rate per annum applicable to the
Revolving Credit Loans under the Base Rate Option. Each Bank's payment to
the Agent pursuant to Section 2.9.3.3 (Disbursements, Reimbursement) shall be
deemed to be a payment in respect of its participation in such Letter of
Credit Borrowing and shall constitute a "Participation Advance" from such
Bank in satisfaction of its participation obligation under Section 2.9.3
(Disbursements, Reimbursement).
2.9.4. Repayment of Participation Advances.
2.9.4.1 Upon (and only upon) receipt by the Agent on behalf of the Letter of
Credit Bank of immediately available funds from the Borrower (i) in
reimbursement of any payment made by the on behalf of the Letter of Credit
Bank under the Letter of Credit with respect to which any Bank has made a
Participation Advance to the Agent on behalf of the Letter of Credit Bank or
(ii) in payment of interest on such a payment made by the Agent under such a
Letter of Credit, the Agent will pay to each Bank, in the same funds as those
received by the Agent, the amount of such Bank's Ratable Share of such funds,
except the Agent shall retain the amount of the Ratable Share of such funds
of any Bank that did not make a Participation Advance in respect of such
payment by Agent. If the Letter of Credit Bank receives any such payment
prior to 1:00 p.m. on a Business Day and does not make payment to any such
Bank which has made such a Participation Advance on the same Business Day,
then such Bank shall be entitled to receive such Letter of Credit Bank
interest at the Federal Funds Effective Rate for each day until such payment
is made to such Bank.
2.9.4.2 If the Agent or the Letter of
Credit Bank is required at any time to return to any Loan Party, or to a
trustee, receiver, liquidator, custodian, or any official in any Insolvency
Proceeding, any portion of the payments made by any Loan Party pursuant to
Section 2.9.4.1 [Repayment of Participation Advances] in reimbursement of a
payment made under the Letter of Credit or interest or fee thereon, each Bank
shall, on demand of the Agent on behalf of the Letter of Credit Bank,
forthwith return to the Agent the amount of its Ratable Share of any amounts
so returned by the Agent or such Letter of Credit Bank plus interest thereon
from the date such demand is made to the date such amounts are returned by
such Bank to the Agent, at a rate per annum equal to the Federal Funds
Effective Rate in effect from time to time.
2.9.5. Documentation.
Each Loan Party agrees to be bound by the terms of the Letter of Credit
Bank's application and agreement for letters of credit and the Letter of
Credit Bank's written regulations and customary practices relating to letters
of credit, though such interpretation may be different from such Loan Party's
own. In the event of a conflict between such application or agreement and
this Agreement, this Agreement shall govern. It is understood and agreed
that, except in the case of gross negligence or willful misconduct, the
Letter of Credit Bank shall not be liable for any error, negligence and/or
mistakes, whether of omission or commission, in following any Loan Party's
instructions or those contained in the Letters of Credit or any
modifications, amendments or supplements thereto.
2.9.6. Determinations to Honor Drawing Requests.
In determining whether to honor any request for drawing under any Letter of
Credit by the beneficiary thereof, the Letter of Credit Bank shall be
responsible only to determine that the documents and certificates required to
be delivered under such Letter of Credit have been delivered and that they
comply on their face with the requirements of such Letter of Credit.
2.9.7. Nature of Participation and Reimbursement Obligations.
Each Bank's obligation in accordance with this Agreement to make the
Revolving Credit Loans or Participation Advances, as contemplated by Section
2.9.3 (Disbursements, Reimbursement), as a result of a drawing under a Letter
of Credit, and the obligations of the Borrower to reimburse the Agent upon a
draw under a Letter of Credit, shall be absolute, unconditional and
irrevocable, and shall be performed strictly in accordance with the terms of
this Section 2.9 [Letter of Credit Subfacility] under all circumstances,
including the following circumstances:
(i) any set-off, counterclaim, recoupment, defense or other right which such
Bank may have against the Agent, any Loan Party or any other Person for any
reason whatsoever;
(ii) the failure of any Loan Party or any other Person to comply, in
connection with a Letter of Credit Borrowing, with the conditions set forth
in Section 2.1 (Revolving Credit Commitments), 2.4 (Revolving Credit Loan
Requests; Swing Loan Requests), 2.4.2 (Swing Loan Requests) or 6.2 (Each
Additional Loan or Letter of Credit), if applicable, or as otherwise set
forth in this Agreement for the making of a Revolving Credit Loan, it being
acknowledged that such conditions are not required for the making of a Letter
of Credit Borrowing and the obligation of the Banks to make Participation
Advances under Section 2.9.3 [Disbursements, Reimbursement];
(iii) any lack of validity or enforceability of any Letter of Credit;
(iv) the existence of any claim, set-off, defense or other right which any
Loan Party or any Bank may have at any time against a beneficiary or any
transferee of any Letter of Credit (or any Persons for whom any such
transferee may be acting), the Agent, the Letter of Credit Bank or any Bank
or any other Person or, whether in connection with this Agreement, the
transactions contemplated herein or any unrelated transaction (including any
underlying transaction between any Loan Party or Subsidiaries of a Loan Party
and the beneficiary for which any Letter of Credit was procured);
(v) any draft, demand, certificate or other document presented under any
Letter of Credit proving to be forged, fraudulent, invalid or insufficient in
any respect or any statement therein being untrue or inaccurate in any
respect even if the Letter of Credit Bank has been notified thereof;
(vi) payment by the Letter of Credit Bank under any Letter of Credit against
presentation of a demand, draft or certificate or other document which does
not comply with the terms of such Letter of Credit;
(vii) any adverse change in the business, operations, properties, assets,
condition (financial or otherwise) or prospects of any Loan Party or
Subsidiaries of a Loan Party;
(viii) any breach of this Agreement or any other Loan Document by any party
thereto;
(ix) the occurrence or continuance of an Insolvency Proceeding with respect
to any Loan Party;
(x) the fact that an Event of Default or a Potential Default shall have
occurred and be continuing;
(xi) the fact that the Expiration Date shall have passed or this Agreement or
the Commitments hereunder shall have been terminated; and
(xii) any other circumstance or happening whatsoever, whether or not similar
to any of the foregoing.
2.9.8. Indemnity.
In addition to amounts payable as provided in Section 9.5 (Reimbursement and
Indemnification of Agent by the Borrower), the Borrower hereby agrees to
protect, indemnify, pay and save harmless the Agent and any Letter of Credit
Bank from and against any and all claims, demands, liabilities, damages,
losses, costs, charges and expenses (including reasonable fees, expenses and
disbursements of counsel and allocated costs of internal counsel) which the
Agent or any Letter of Credit Bank may incur or be subject to as a
consequence, direct or indirect, of the issuance of any Letter of Credit,
other than as a result of (A)the gross negligence or willful misconduct of
the Agent or any Letter of Credit Bank as determined by a final judgment of a
court of competent jurisdiction or (B)the wrongful dishonor by the Letter of
Credit Bank of a proper demand for payment made under any Letter of Credit,
except if such dishonor resulted from any act or omission, whether rightful
or wrongful, of any present or future de jure or de facto government or
governmental authority (all such acts or omissions herein called
"Governmental Acts").
2.9.9. Liability for Acts and Omissions.
As between any Loan Party and the Agent or any Letter of Credit Bank, such
Loan Party assumes all risks of the acts and omissions of, or misuse of the
Letters of Credit by, the respective beneficiaries of such Letters of Credit.
In furtherance and not in limitation of the foregoing, neither the Agent nor
any Letter of Credit Bank shall not be responsible for: (i)the form,
validity, sufficiency, accuracy, genuineness or legal effect of any document
submitted by any party in connection with the application for an issuance of
any such Letter of Credit, even if it should in fact prove to be in any or
all respects invalid, insufficient, inaccurate, fraudulent or forged (even if
the Agent or any Letter of Credit Bank shall have been notified thereof);
(ii)the validity or sufficiency of any instrument transferring or assigning
or purporting to transfer or assign any such Letter of Credit or the rights
or benefits thereunder or proceeds thereof, in whole or in part, which may
prove to be invalid or ineffective for any reason; (iii)the failure of the
beneficiary of any such Letter of Credit, or any other party to which such
Letter of Credit may be transferred, to comply fully with any conditions
required in order to draw upon such Letter of Credit or any other claim of
any Loan Party against any beneficiary of such Letter of Credit, or any such
transferee, or any dispute between or among any Loan Party and any
beneficiary of any Letter of Credit or any such transferee; (iv)errors,
omissions, interruptions or delays in transmission or delivery of any
messages, by mail, cable, telegraph, telex or otherwise, whether or not they
be in cipher; (v) errors in interpretation of technical terms; (vi)any loss
or delay in the transmission or otherwise of any document required in order
to make a drawing under any such Letter of Credit or of the proceeds thereof;
(vii)the misapplication by the beneficiary of any such Letter of Credit of
the proceeds of any drawing under such Letter of Credit; or (viii)any
consequences arising from causes beyond the control of the Agent or Letter of
Credit Bank, including any Governmental Acts, and none of the above shall
affect or impair, or prevent the vesting of, any of the Agent's or any Letter
of Credit Bank's rights or powers hereunder. Nothing in the preceding
sentence shall relieve the Agent or any Letter of Credit Bank from liability
for the Agent's or any Letter of Credit Bank's gross negligence or willful
misconduct in connection with actions or omissions described in such clauses
(i) through (viii) of such sentence.
In furtherance and extension and not in limitation of the specific provisions
set forth above, any action taken or omitted by the Agent or any Letter of
Credit Bank under or in connection with the Letters of Credit issued by it or
any documents and certificates delivered thereunder, if taken or omitted in
good faith, shall not put the Agent or any Letter of Credit Bank under any
resulting liability to any Loan Party or any Bank.
2.9.10. Sharing Letter of Credit Documentation.
Each Letter of Credit Bank shall furnish to the Agent copies of any letter of
credit application and related documentation to which such Letter of Credit
Bank and a Loan Party are parties and promptly after issuance, a copy of any
Letter of Credit or amendment to any Letter of Credit issued by such Bank.
2.10 Extension by Banks of the Expiration Date.
2.10.1. Requests; Approval by All Banks.
After delivery by the Borrower of the annual financial statements to be
provided under Section 7.3.2 (Annual Financial Statements) for the fiscal
year ending October 30, 2001 or any subsequent fiscal year, the Borrower may
request a one-year extension of the Expiration Date by written notice to the
Banks made by May 30, and the Banks agree to respond to the Borrower's
request for an extension no later than thirty (30) days following receipt of
the request; provided, however, that the failure of any Bank to respond
within such time period shall not in any manner constitute an agreement by
such Bank to extend the Expiration Date. If all Banks elect to extend, the
Expiration Date shall be extended for a period of one year. If one or more
Banks decline to extend or do not respond to Borrower's request, the
provisions of Section 2.10.2 [Approval by 80% Banks] shall apply.
2.10.2. Approval by 80% Banks.
In the event that one or more Banks do not agree to extend the Expiration
Date or do not respond to Borrower's request for an extension within the time
required under Section 2.10.1 (Requests; Approval by All Banks) (each a "Non-
approving Bank"), but 80% of the Banks (measured by their Ratable Shares and
not per capita) agree to such extension within such time (each such agreeing
Bank being an "Extending Bank"), then the Borrower may, at the Borrower's
option, on or before July 31 of each year notify the Agent and the Banks that
the Borrower intends to employ one or more of the following three (3)
options: (i) cause the Commitment of each Non-approving Bank to be
terminated (after which time such Non-approving Bank shall cease to be a
"Bank" hereunder) and cause the aggregate Commitments to be reduced by the
amount of such terminated Commitments, or (ii) require the Non-approving
Banks to sell, and allow (upon prior notice to the Agent) the Extending Banks
which have agreed to such extension within the time required under Section
2.11.1 (Requests; Approval by All Banks) or any financial institution
approved by the Agent and (absent an Event of Default) the Borrower (each
such Person referred to in this clause (ii) being an "Assignee Bank") to
purchase all of the outstanding Loans if any, of the Non-approving Banks and
succeed to and assume the Commitments and all other rights, interests and
obligations of the Non-approving Banks under this Agreement and the other
Loan Documents, or (iii) require the Non-approving Bank to remain a Bank and
require it to maintain its Commitment and retain for such Non-approving
Bank's Commitment the "Expiration Date" established prior to the extension
referred to in this Section 2.10.2, all subject to the other provisions of
this Agreement. Any such purchase and assumption pursuant to clause (ii)
above shall be (1)pursuant to an Assignment and Assumption Agreement and
(2)subject to and in accordance with Section 10.11 (Successors and Assigns).
The Borrower shall pay all amounts due and payable to the Non-approving Bank
on the effective date of such Assignment and Assumption Agreement. In the
event that the Agent shall become a Non-approving Bank, the provisions of
this Section 2.10 (Extension by Banks of the Expiration Date) shall be
subject to Section 9.14 (Successor Agent). In the event that the Borrower
has selected the option described in clause (ii) above and if the Loans and
Commitments of a Non-approving Bank are, nevertheless, not fully assigned and
assumed pursuant to this Section 2.10.2, or terminated or retained pursuant
to clause (i) or clause (iii)above, as applicable, on or before August 31 of
such year, then the Expiration Date shall not be extended for any Bank.
Nothing in this Section 2.10.2 shall expand the options provided in Section
4.4.2 Replacement of a Bank.
2.11 Designation of Subsidiaries and Release of Guarantors.
2.11.1. Release of Guarantors.
At any time when the Borrower wishes to cause the Banks to release a
Guarantor from its obligations under the Guaranty Agreement (whether directly
or in connection with the designation of a Restricted Subsidiary as a Non-
Restricted Person), the consent of the Banks shall be required as described
below and shall be subject to the other provisions of this Section 2.11.
(a) For the release of any Guarantor (i) whose assets are principally
comprised of residential or commercial property which is leased or held for
the purposes of leasing to unaffiliated third parties or (ii) in which any
Loan Party (or Loan Parties in the aggregate) has, at the time of such
release, a Subsidiary Investment less than $100,000, no consent of the Banks
shall be required and such request of the Borrower shall be granted absent an
Event of Default or Potential Default, effective on the date specified by the
Borrower which shall not be earlier than five (5) Business Days after the
receipt by the Agent of such request;
(b) For the release of any Guarantor (not described in item (a)(i) hereof)
in which any Loan Party (or Loan Parties in the aggregate) has, at the time
of such release, a Subsidiary Investment greater than or equal to $100,000
and less than $1,000,000, the consent of Required Banks shall be required;
(c) For the release of Hovnanian or any Guarantor (not described in item
(a)(i) hereof) in which any Loan Party (or Loan Parties in the aggregate)
has, at the time of such release, a Subsidiary Investment greater than or
equal to $1,000,000, the consent of 100% of the Banks shall be required; and
(d) The designation of a Person as a Non-Restricted Person for any reason
shall not itself constitute a release of any Guarantor.
2.11.2. Designation of Non-Restricted Person.
The Borrower may, by written notice delivered to the Agent, designate as a
Non-Restricted Person a Subsidiary formerly designated a Restricted
Subsidiary or a newly formed or acquired Subsidiary, subject to: (i) the
provisions of subsection 2.11.1 hereof in relation to Guaranties, (ii) the
requirements of Section 7 [Covenants] and in particular Section 7.2.10
(Borrowing Base); and (iii) the requirement that such designation not cause
an Event of Default or Potential Default. Such designation shall be
effective on the date specified by the Borrower which shall not be earlier
than five (5) Business Days after the receipt by the Agent of such notice.
2.11.3. Automatic Designation of Non-Restricted Person.
Upon the occurrence of any event described in Section 8.1.10 (Insolvency),
Section 8.1.14 (Involuntary Proceedings), Section 8.1.15 (Voluntary
Proceedings), or the winding-up or termination of business, with respect to
any Restricted Subsidiary, such Subsidiary shall automatically become a Non-
Restricted Person. Such designation as a Non-Restricted Person shall, with
respect such Person's obligations under the Guaranty Agreement, if any, be
subject to the requirements of Section 2.11.1 (Release of Guarantors). The
release of any Subsidiary which is a Guarantor from its obligations under the
Guaranty Agreement pursuant to Section 2.11.1 (Release of Guarantors) shall
automatically cause such Subsidiary to be a Non-Restricted Person.
2.11.4. Designation of Restricted Subsidiary.
The Borrower may by written notice delivered to the Agent designate as a
Restricted Subsidiary a Subsidiary formerly designated a Non-Restricted
Person or a newly formed or acquired Subsidiary. Such designation is subject
to (i) compliance with Section 10.18 (Joinder of Guarantors); (ii) the
requirements of Section 7 (Covenants) and in particular Section 7.2.10
(Borrowing Base); and (iii) the requirement that such designation not cause
an Event of Default or Potential Default. Such designation shall be effective
on the date specified by the Borrower which shall not be earlier than five
(5) Business Days after the receipt by the Agent of such notice.
3. INTEREST RATES
3.1 Interest Rate Options.
The Borrower shall pay interest in respect of the outstanding unpaid
principal amount of the Loans as selected by it from the Base Rate Option or
LIBO-Rate Option set forth below applicable to the Loans, it being understood
that, subject to the provisions of this Agreement, the Borrower may select
different Interest Rate Options and different Interest Periods to apply
simultaneously to the Loans comprising different Borrowing Tranches and may
convert to or renew one or more Interest Rate Options with respect to all or
any portion of the Loans comprising any Borrowing Tranche, provided that
there shall not be at any one time outstanding more than ten (10) Borrowing
Tranches in the aggregate among all of the Loans, and provided further that
only the Base Rate Option shall apply to the Swing Loans. If at any time the
designated rate applicable to any Loan made by any Bank exceeds such Bank's
highest lawful rate, the rate of interest on such Bank's Loan shall be
limited to such Bank's highest lawful rate.
3.1.1. Revolving Credit Interest Rate Options.
The Borrower shall have the right to select from the following Interest Rate
Options applicable to the Revolving Credit Loans (subject to the provisions
above regarding Swing Loans):
(i) Revolving Credit Base Rate Option: A fluctuating rate per annum
(computed on the basis of a year of 365 or 366 days, as the case may be, and
actual days elapsed) equal to the Base Rate plus the Applicable Margin, such
interest rate to change automatically from time to time effective as of the
effective date of each change in the Base Rate; or
(ii) Revolving Credit LIBO-Rate Option: A rate per annum (computed on the
basis of a year of 360 days and actual days elapsed) equal to the LIBO-Rate
plus the Applicable Margin.
3.1.2. Rate Quotations.
The Borrower may call the Agent on or before the date on which a Loan Request
is to be delivered to receive an indication of the rates then in effect, but
it is acknowledged that such projection shall not be binding on the Agent or
the Banks nor affect the rate of interest which thereafter is actually in
effect when the election is made.
3.2 Interest Periods.
At any time when the Borrower shall select, convert to or renew a LIBO-Rate
Option, the Borrower shall notify the Agent thereof at least three (3)
Business Days prior to the effective date of such LIBO-Rate Option by
delivering a Loan Request. The notice shall specify an Interest Period
during which such Interest Rate Option shall apply. Notwithstanding the
preceding sentence, in the case of the renewal of a LIBO-Rate Option at the
end of an Interest Period, the first day of the new Interest Period shall be
the last day of the preceding Interest Period, without duplication in payment
of interest for such day.
3.3 Interest After Default.
3.3.1. Default Rate.
To the extent permitted by Law, upon the occurrence of an Event of Default
under Section 8.1.1 (Payment Under Loan Documents), Section 8.1.10
(Insolvency), Section 8.1.14 (Involuntary Proceedings), Section 8.1.15
(Voluntary Proceedings) or the Obligations are accelerated under this
Agreement and until such time such Event of Default shall have been cured or
waived, each Obligation hereunder shall bear interest at a rate per annum
equal to the sum of the rate of interest applicable under the Revolving
Credit Base Rate Option plus an additional 3.0% per annum from the time such
Obligation becomes due and payable and until it is paid in full (the "Default
Rate").
3.3.2. Acknowledgment.
The Borrower acknowledges that the increase in rate referred to in Section
3.3.1 (Default Rate) reflects, among other things, the fact that such Loans
or other amounts have become a substantially greater risk given their default
status and that the Banks are entitled to additional compensation for such
risk; and all such interest shall be payable by Borrower upon demand by
Agent.
3.4 LIBO-Rate Unascertainable; Illegality; Increased Costs; Deposits
Not Available.
3.4.1. Unascertainable.
If on any date on which a LIBO-Rate would otherwise be determined, the Agent
shall have determined that:
(i) adequate and reasonable means do not exist for ascertaining such LIBO-
Rate, or
(ii) a contingency has occurred which materially and adversely affects the
London interbank eurodollar market relating to the LIBO-Rate, the Agent shall
have the rights specified in Section 3.4.3 [Agent's and Bank's Rights].
3.4.2. Illegality; Increased Costs; Deposits Not Available.
If at any time any Bank shall have determined that:
(i) the making, maintenance or funding of any Loan to which a LIBO-Rate
Option applies has been made impracticable or unlawful by compliance by such
Bank in good faith with any Law or any interpretation or application thereof
by any Official Body or with any request or directive of any such Official
Body (whether or not having the force of Law), or
(ii) such LIBO-Rate Option will not adequately and fairly reflect the cost to
such Bank of the establishment or maintenance of any such Loan, or
(iii) after making all reasonable efforts, deposits of the relevant amount in
Dollars for the relevant Interest Period for a Loan, or to banks generally,
to which a LIBO-Rate Option applies, respectively, are not available to such
Bank with respect to such Loan, or to banks generally, in the interbank
eurodollar market,
then the Agent shall have the rights specified in Section 3.4.3 (Agent's and
Bank's Rights).
3.4.3. Agent's and Bank's Rights.
In the case of any event specified in Section 3.4.1 (Unascertainable) above,
the Agent shall promptly so notify the Banks and the Borrower thereof, and in
the case of an event specified in Section 3.4.2 (Illegality; Increased Costs;
Deposits Not Available) above, such Bank shall promptly so notify the Agent
and endorse a certificate to such notice as to the specific circumstances of
such notice, and the Agent shall promptly send copies of such notice and
certificate to the other Banks and the Borrower. Upon such date as shall be
specified in such notice (which shall not be earlier than the date such
notice is given), the obligation of (A)the Banks, in the case of such notice
given by the Agent, or (B)such Bank, in the case of such notice given by such
Bank, to allow the Borrower to select, convert to or renew a LIBO-Rate Option
shall be suspended until the Agent shall have later notified the Borrower, or
such Bank shall have later notified the Agent, of the Agent's or such Bank's,
as the case may be, determination that the circumstances giving rise to such
previous determination no longer exist. If at any time the Agent makes a
determination under Section 3.4.1 (Unascertainable) and the Borrower has
previously notified the Agent of its selection of, conversion to or renewal
of a LIBO-Rate Option and such Interest Rate Option has not yet gone into
effect, such notification shall be deemed to provide for selection of,
conversion to or renewal of the Base Rate Option otherwise available with
respect to such Loans. If any Bank notifies the Agent of a determination
under Section 3.4.2 (Illegality; Increased Costs; Deposits Not Available),
the Borrower shall, subject to the Borrower's indemnification Obligations
under Section 4.6.2 (Indemnity), as to any Loan of the Bank to which a LIBO-
Rate Option applies, on the date specified in such notice either convert such
Loan to the Base Rate Option otherwise available with respect to such Loan or
prepay such Loan in accordance with Section 4.4 (Voluntary Prepayments).
Absent due notice from the Borrower of conversion or prepayment, such Loan
shall automatically be converted to the Base Rate Option otherwise available
with respect to such Loan upon such specified date.
3.5 Selection of Interest Rate Options.
If the Borrower fails to select a new Interest Period to apply to any
Borrowing Tranche of Loans under the LIBO-Rate Option at the expiration of an
existing Interest Period applicable to such Borrowing Tranche in accordance
with the provisions of Section 3.2 (Interest Periods), the Borrower shall be
deemed to have converted such Borrowing Tranche to the Revolving Credit Base
Rate Option, commencing upon the last day of the existing Interest Period.
4. PAYMENTS
4.1 Payments.
All payments and prepayments to be made in respect of principal, interest,
Commitment Fees, Letter of Credit Fees, Agent's Fee or other fees or amounts
due from the Borrower hereunder shall be payable prior to eleven o'clock
(11:00) a.m., Eastern time, on the date when due without presentment, demand,
protest or notice of any kind, all of which are hereby expressly waived by
the Borrower, and without set-off, counterclaim or other deduction of any
nature, and an action therefor shall immediately accrue. Such payments shall
be made to the Agent at the Principal Office for the account of PNC Bank with
respect to the Swing Loans and for the ratable accounts of the Banks with
respect to the Revolving Credit Loans in Dollars and in immediately available
funds, and the Agent shall promptly distribute such amounts to the Banks in
immediately available funds, provided that in the event payments are received
by eleven o'clock (11:00) a.m., Eastern time, by the Agent with respect to
the Loans and such payments are not distributed to the Banks on the same day
received by the Agent, the Agent shall pay the Banks the Federal Funds
Effective Rate with respect to the amount of such payments for each day held
by the Agent and not distributed to the Banks. The Agent's and each Bank's
statement of account, ledger or other relevant record shall, in the absence
of manifest error, be conclusive as the statement of the amount of principal
of and interest on the Loans and other amounts owing under this Agreement and
shall be deemed an "account stated."
4.2 Pro Rata Treatment of Banks.
Each borrowing shall be allocated to each Bank according to its Ratable
Share, and each selection of, conversion to or renewal of any Interest Rate
Option and each payment or prepayment by the Borrower with respect to
principal, interest, Commitment Fees, Letter of Credit Fees, or other fees
(except for the Agent's Fee) or amounts due from the Borrower hereunder to
the Banks with respect to the Loans, shall (except as provided in Section
3.4.3 (Agent's and Bank's Rights) in the case of an event specified in
Sections 3.4 (LIBO-Rate Unascertainable; Illegality, Increased Costs,
Deposits Not Available), 4.4.2 (Replacement of a Bank) or 4.6 (Additional
Compensation in Certain Circumstances)) be made in proportion to the
applicable Loans outstanding from each Bank and, if no such Loans are then
outstanding, in proportion to the Ratable Share of each Bank.
Notwithstanding any of the foregoing, each borrowing or payment or prepayment
by the Borrower of principal, interest, fees or other amounts from the
Borrower with respect to Swing Loans shall be made by or to PNC Bank
according to Section 2 [Revolving Credit and Swing Loan Facilities].
4.3 Interest Payment Dates.
Interest on Loans to which the Base Rate Option applies shall be due and
payable in arrears on the first Business Day of each calendar month after the
date hereof and on the Expiration Date or upon acceleration of the Loan.
Interest on Loans to which the LIBO-Rate Option applies shall be due and
payable on the last day of each Interest Period for those Loans and, if such
Interest Period is longer than three (3) Months, also on the 90th day of such
Interest Period. Interest on mandatory prepayments of principal under
Section 4.5 (Mandatory Payments) shall be due on the date such mandatory
prepayment is due. Interest on the principal amount of each Loan or other
monetary Obligation shall be due and payable on demand after such principal
amount or other monetary Obligation becomes due and payable (whether on the
stated maturity date, upon acceleration or otherwise).
4.4 Voluntary Prepayments.
4.4.1. Right to Prepay.
The Borrower shall have the right at its option at any time and from time to
time to prepay the Loans in whole or part without premium or penalty (except
as provided in Section 4.4.2 [Replacement of a Bank] below or in Section 4.6
(Additional Compensation in Certain Circumstances)).
Whenever the Borrower desires to prepay any part of the Loans, it shall
provide a prepayment notice to the Agent no later than (A) 11:00 a.m.,
Eastern time, at least two (2) Business Days prior to the date of prepayment
of the Revolving Credit Loans to which the LIBO-Rate Option applies, (B)
11:00 a.m., Eastern time, on the date of prepayment of Revolving Credit Loans
to which the Base Rate Option applies or (C) 2:00 p.m., Eastern time, on the
date of prepayment of Swing Loans, setting forth the following information:
(x) the date, which shall be a Business Day, on which the
proposed prepayment is to be made;
(y) a statement indicating the application of the prepayment
between the Swing Loans and the Revolving Credit Loans; and
(z) the total principal amount of such prepayment, which shall
not be less than (i) $100,000 and in increments of $100,000 for
any Swing Loans, (ii) $500,000 and in increments of $100,000 for
any Revolving Credit Loan to which the Base Rate Option applies
or (iii) $2,500,000 and in increments of $500,000 for any
Revolving Credit Loan to which the LIBO-Rate Option applies.
All prepayment notices shall be irrevocable. The principal amount of the
Loans for which a prepayment notice is given, together with interest on such
principal amount except with respect to Loans to which the Base Rate Option
applies, shall be due and payable on the date specified in such prepayment
notice as the date on which the proposed prepayment is to be made. Except as
provided in Section 3.4.3 (Agent's and Bank's Rights), if the Borrower
prepays a Loan but fails to specify the applicable Borrowing Tranche which
the Borrower is prepaying, the prepayment shall be applied first to Swing
Loans, then to Loans to which the Base Rate Option applies, and then to Loans
to which the LIBO-Rate Option applies. Any prepayment hereunder shall be
subject to the Borrower's Obligation to indemnify the Banks under Section
4.6.2 (Indemnity).
4.4.2. Replacement of a Bank.
In the event any Bank (i)gives notice under Section 3.4 (LIBO-Rate
Unascertainable; Illegality; Increased Costs; Deposits Not Available) or
Section 4.6.1 (Increased Costs or Reduced Return Resulting from Taxes,
Reserves, Capital Adequacy Requirements, Expenses, Etc.), (ii)does not fund
Revolving Credit Loans because the making of such Loans would contravene any
Law applicable to such Bank, or (iii)becomes subject to the control of an
Official Body (other than normal and customary supervision), then the
Borrower shall have the right at its option, with the consent of the Agent,
which shall not be unreasonably withheld, to prepay the Loans of such Bank in
whole, together with all interest accrued thereon, and terminate such Bank's
Commitment within ninety (90) days after (x)receipt of such Bank's notice
under Section 3.4 (LIBO-Rate Unascertainable; Illegality; Increased Costs;
Deposits Not Available) or 4.6.1 (Increased Costs or Reduced Return Resulting
from Taxes, Reserves, Capital Adequacy Requirements, Expenses, Etc.), (y)the
date such Bank has failed to fund Revolving Credit Loans because the making
of such Loans would contravene Law applicable to such Bank, or (z)the date
such Bank became subject to the control of an Official Body, as applicable;
provided that the Borrower shall also pay to such Bank at the time of such
prepayment any amounts required under Section 4.6 (Additional Compensation in
Certain Circumstances) and any accrued interest due on such amount and any
related fees; provided, further, the remaining Banks shall have no obligation
hereunder to increase their Commitments. Notwithstanding the foregoing, the
Agent may only be replaced subject to the requirements of Section 9.14
(Successor Agent).
4.4.3. Change of Lending Office.
Each Bank agrees that upon the occurrence of any event giving rise to
increased costs or other special payments under Section 3.4.2 (Illegality;
Increased Costs; Deposits Not Available) or 4.6.1 (Increased Costs or Reduced
Return Resulting from Taxes, Reserves, Capital Adequacy Requirements,
Expenses, Etc.) with respect to such Bank, it will if requested by the
Borrower, use reasonable efforts (subject to overall policy considerations of
such Bank) to designate another lending office for any Loans or Letters of
Credit affected by such event, provided that such designation is made on such
terms that such Bank and its lending office suffer no economic, legal or
regulatory disadvantage, with the object of avoiding the consequence of the
event giving rise to the operation of such Section. Nothing in this Section
4.4.3 (Change of Lending Office) shall affect or postpone any of the
Obligations of the Borrower or any other Loan Party or the rights of the
Agent or any Bank provided in this Agreement.
4.5 Mandatory Payments.
The Borrower shall make mandatory payments of principal (together with
accrued interest thereon) to the Agent to the extent by which Revolving
Facility Usage exceeds at any time the Commitments (as they may be reduced
pursuant to Section 2.1.4 (Voluntary Reduction of Commitment), Section 2.11.2
(Approval by 80% Banks) or otherwise) within three (3) Business Days after
such excess is calculated.
4.6 Additional Compensation in Certain Circumstances.
4.6.1. Increased Costs or Reduced Return Resulting from
Taxes, Reserves, Capital Adequacy Requirements, Expenses, Etc.
If any Law, guideline or interpretation or any change in any Law, guideline
or interpretation or application thereof by any Official Body charged with
the interpretation or administration thereof or compliance with any request
or directive (whether or not having the force of Law) of any central bank or
other Official Body:
(i) subjects any Bank to any tax or changes the basis of taxation with
respect to this Agreement, the Notes, the Loans or payments by the Borrower
of principal, interest, Commitment Fees, or other amounts due from the
Borrower hereunder (except for taxes on the overall net income of such Bank),
(ii) imposes, modifies or deems applicable any reserve, special deposit or
similar requirement against credits or commitments to extend credit extended
by, or assets (funded or contingent) of, deposits with or for the account of,
or other acquisitions of funds by, any Bank, or
(iii) imposes, modifies or deems applicable any capital adequacy or similar
requirement (A)against assets (funded or contingent) of, or letters of
credit, other credits or commitments to extend credit extended by, any Bank,
or (B)otherwise applicable to the obligations of any Bank under this
Agreement,
and the result of any of the foregoing is to increase the cost to, reduce the
income receivable by, or impose any expense upon any Bank with respect to
this Agreement, or the making, maintenance or funding of any part of the
Loans (or, in the case of any capital adequacy or similar requirement, to
have the effect of reducing the rate of return on any Bank's capital, taking
into consideration such Bank's customary policies with respect to capital
adequacy) by an amount which such Bank in its sole discretion deems to be
material, such Bank shall from time to time notify the Borrower and the Agent
of the amount determined in good faith (using any averaging and attribution
methods employed in good faith) by such Bank to be necessary to compensate
such Bank for such increase in cost, reduction of income, additional expense
or reduced rate of return. Such notice shall set forth in reasonable detail
the basis for such determination. Such amount shall be due and payable by
the Borrower to such Bank ten (10) Business Days after such notice is given.
4.6.2. Indemnity.
In addition to the compensation required by Section 4.6.1 (Increased Costs or
Reduced Return Resulting from Taxes, Reserves, Capital Adequacy Requirements,
Expenses, Etc.), the Borrower shall indemnify each Bank against all
liabilities, losses or expenses (including actual loss of margin, any loss or
expense incurred in liquidating or employing deposits from third parties and
any loss or expense incurred in connection with funds acquired by a Bank to
fund or maintain Loans subject to a LIBO-Rate Option) which such Bank
sustains or incurs as a consequence of any:
(i) payment, prepayment, conversion or renewal of any Loan to which a LIBO-
Rate Option applies on a day other than the last day of the corresponding
Interest Period (whether or not such payment or prepayment is mandatory,
voluntary or automatic and whether or not such payment or prepayment is then
due),
(ii) attempt by the Borrower to revoke (expressly, by later inconsistent
notices or otherwise) in whole or part any Loan Requests under Section 2.4
(Revolving Credit Loan Requests; Swing Loan Requests) or Section 3.2
(Interest Periods) or notice relating to prepayments under Section 4.4
(Voluntary Prepayments), or
(iii) default by the Borrower in the performance or observance of any
covenant or condition contained in this Agreement or any other Loan Document,
including any failure of the Borrower to pay when due (by acceleration or
otherwise) any principal, interest, Commitment Fee, Letter of Credit Fees, or
any other amount due hereunder.
If any Bank sustains or incurs any such loss or expense, it shall from time
to time notify the Borrower of the amount determined in good faith by such
Bank (which determination may include such assumptions, allocations of costs
and expenses and averaging or attribution methods as such Bank shall deem
reasonable) to be necessary to indemnify such Bank for such loss or expense.
Such notice shall set forth in reasonable detail the basis for such
determination. Such amount shall be due and payable by the Borrower to such
Bank ten (10) Business Days after such notice is given.
4.7 Notes.
The Revolving Credit Loans made by each Bank shall, if requested by such
Bank, be evidenced by a Revolving Credit Note.
4.8 Settlement Date Procedures.
The Borrower may borrow, repay and reborrow Swing Loans and PNC Bank may make
Swing Loans as provided in Section 2.1.2 (Swing Loan Commitment) hereof. On
any Business Day, the Agent may notify each Bank of its Ratable Share of the
total of the Revolving Credit Loans and the Swing Loans (each a "Required
Share"). Prior to 2:30 p.m., Eastern time, on the date following the date of
such notice, each Bank shall pay to the Agent the amount equal to the
difference between its Required Share and its Revolving Credit Loans, and the
Agent shall pay to each Bank its Ratable Share of all payments made by the
Borrower to the Agent with respect to the Revolving Credit Loans. The Agent
shall also effect settlement in accordance with the foregoing sentence on the
proposed Borrowing Dates for Revolving Credit Loans and on any date when
payments of principal of any Loan is required to be paid by any Loan Party
hereunder and may at its option, and in consultation with the Borrower,
effect settlement on any other Business Day. These settlement procedures are
established solely as a matter of administrative convenience, and nothing
contained in this Section 4.8 shall relieve the Banks of their obligations to
fund Revolving Credit Loans on dates other than a Settlement Date pursuant to
Section 2.8 (Borrowings to Repay Swing Loans). The Agent may at any time at
its option for any reason whatsoever require each Bank to pay immediately to
the Agent such Bank's Ratable Share of the outstanding Revolving Credit Loans
and each Bank may at any time require the Agent to pay immediately to such
Bank its Ratable Share of all payments made by the Borrower to the Agent with
respect to the Revolving Credit Loans.
5. REPRESENTATIONS AND WARRANTIES
5.1 Representations and Warranties.
The Borrower and Hovnanian, jointly and severally, represent and warrant to
the Agent and to each of the Banks as follows:
5.1.1. Organization and Qualification.
Each of the Borrower, KHL and Hovnanian is a corporation duly organized,
validly existing and in good standing under the laws of its jurisdiction of
organization and each other Loan Party is a corporation, partnership or
limited liability company duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization except to the
extent the failure to do so could not, individually or in the aggregate,
reasonably be expected to cause a Material Adverse Change. Each Loan Party
has the lawful power to own or lease its properties and to engage in the
business it presently conducts or proposes to conduct. Each Loan Party is
duly licensed or qualified and in good standing in each jurisdiction where
the failure to obtain them could, individually or in the aggregate,
reasonably be expected to cause a Material Adverse Change.
5.1.2. Subsidiaries.
As of the Closing Date, Schedule 5.1.2 states the name of each of Hovnanian's
Subsidiaries and its jurisdiction of incorporation. Hovnanian and each Loan
Party has good and marketable title to all of the Subsidiary Shares,
Partnership Interests and LLC Interests it purports to own, free and clear in
each case of any Lien. All Subsidiary Shares, Partnership Interests and LLC
Interests have been validly issued, and all Subsidiary Shares are fully paid
and nonassessable. All capital contributions and other consideration
required to be made or paid in connection with the issuance of the
Partnership Interests and LLC Interests have been made or paid, as the case
may be.
5.1.3. Power and Authority.
Each Loan Party has full power to enter into, execute, deliver and carry out
this Agreement and the other Loan Documents to which it is a party, to incur
the Indebtedness contemplated by the Loan Documents and to perform its
Obligations under the Loan Documents to which it is a party, and all such
actions have been duly authorized by all necessary proceedings on its part.
5.1.4. Validity and Binding Effect.
This Agreement has been duly and validly executed and delivered by each Loan
Party, and each other Loan Document which any Loan Party is required to
execute and deliver on or after the date hereof will have been duly executed
and delivered by such Loan Party on the required date of delivery of such
Loan Document. This Agreement and each other Loan Document constitutes, or
will constitute, legal, valid and binding obligations of each Loan Party
which is or will be a party thereto on and after its date of delivery
thereof, enforceable against such Loan Party in accordance with its terms,
except to the extent that enforceability of any of such Loan Document may be
limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting the enforceability of creditors' rights generally or
limiting the right of specific performance.
5.1.5. No Conflict.
Neither the execution and delivery of this Agreement or the other Loan
Documents by any Loan Party nor the consummation of the transactions herein
or therein contemplated or compliance with the terms and provisions hereof or
thereof by any of them will conflict with, constitute a default under or
result in any breach of (i)the terms and conditions of the certificate of
incorporation, bylaws, certificate of limited partnership, partnership
agreement, certificate of formation, limited liability company agreement or
other organizational documents of any Loan Party or (ii)any Law or any
material agreement or instrument or order, writ, judgment, injunction or
decree to which any Loan Party is a party or by which it is bound or to which
it is subject, or result in the creation or enforcement of any Lien, charge
or encumbrance whatsoever upon any property (now or hereafter acquired) of
any Loan Party (other than Liens granted under the Loan Documents) which
could, individually or in the aggregate, reasonably be expected to cause a
Material Adverse Change.
5.1.6. Litigation.
There are no actions, suits, proceedings or investigations pending or, to the
knowledge of any Loan Party, threatened against such Loan Party at law or
equity before any Official Body which individually or in the aggregate may
result in any Material Adverse Change. None of the Loan Parties is in
violation of any order, writ, injunction or any decree of any Official Body
which may result in any Material Adverse Change.
5.1.7. Title to Properties.
Each Loan Party has good and marketable title to or a valid leasehold
interest in all properties, assets and other rights which it purports to own
or lease or which are reflected as owned or leased on its books and records,
free and clear of all Liens and encumbrances, except Permitted Liens, and
subject to the terms and conditions of the applicable leases. All leases of
property are in full force and effect without the necessity for any consent
which has not previously been obtained upon consummation of the transactions
contemplated hereby.
5.1.8. Financial Statements.
(i) Historical Statements. The Borrower has delivered to the Agent copies
of Hovnanian's audited consolidated year-end financial statements for and as
of the end of the fiscal year ended October 31, 2000 (the "Annual
Statements"). In addition, the Borrower has delivered to the Agent copies of
Hovnanian's unaudited consolidated interim financial statements for the
fiscal year to date and as of the end of the fiscal quarter ended April 30,
2001 (the "Interim Statements") (the Annual and Interim Statements being
collectively referred to as the "Historical Statements"). The Historical
Statements were compiled from the books and records maintained by Hovnanian's
management, are correct and complete and fairly represent the consolidated
financial condition of Hovnanian and its Subsidiaries as of their dates and
the results of operations for the fiscal periods then ended and have been
prepared in accordance with GAAP consistently applied, subject (in the case
of the Interim Statements) to normal year-end audit adjustments.
(ii) Financial Projections. The Borrower has delivered to the Agent and the
Banks financial projections of Hovnanian and its Subsidiaries for the period
ending October 31, 2002 derived from various assumptions of Hovnanian's
management (the "Financial Projections"). The Financial Projections
represent a reasonable range of possible results in light of the history of
the business, present and foreseeable conditions and the intentions of
Hovnanian's management (it being understood that actual results may vary
materially from the Financial Projections). The Financial Projections
accurately reflect the liabilities of Hovnanian and its Subsidiaries upon
consummation of the transactions contemplated hereby as of the Closing Date.
(iii) Accuracy of Financial Statements. As of the Closing Date, neither
Hovnanian nor any Subsidiary of Hovnanian has any liabilities, contingent or
otherwise, or forward or long-term commitments that are required by GAAP to
be, but are not, disclosed in the Historical Statements or in the notes
thereto, and except as disclosed therein there are no unrealized or
anticipated losses from any commitments of Hovnanian or any Subsidiary of
Hovnanian which may cause a Material Adverse Change. Since October 31, 2000,
no Material Adverse Change has occurred.
5.1.9. Use of Proceeds; Margin Stock.
5.1.9.1 General.
The Loan Parties intend to use the proceeds of the Loans in accordance with
Sections 2.7 (Use of Proceeds) and 7.1.10 (Use of Proceeds).
5.1.9.2 Margin Stock.
None of the Loan Parties engages or intends to engage principally, or as one
of its important activities, in the business of extending credit for the
purpose, immediately, incidentally or ultimately, of purchasing or carrying
margin stock (within the meaning of Regulation U). No part of the proceeds
of any Loan has been or will be used, immediately, incidentally or
ultimately, to purchase or carry any margin stock or to extend credit to
others for the purpose of purchasing or carrying any margin stock or to
refund Indebtedness originally incurred for such purpose, or for any purpose
which entails a violation of or which is inconsistent with the provisions of
the regulations of the Board of Governors of the Federal Reserve System.
None of the Loan Parties holds or intends to hold margin stock in such
amounts that more than 25% of the reasonable value of the assets of such Loan
Party are or will be represented by margin stock.
5.1.10. Full Disclosure.
Neither this Agreement nor any other Loan Document, nor any certificate,
statement, agreement or other documents furnished to the Agent or any Bank in
connection herewith or therewith, contains any untrue statement of a material
fact or omits to state a material fact necessary in order to make the
statements contained herein and therein, in light of the circumstances under
which they were made, not misleading. There is no fact known to any Loan
Party which materially adversely affects the business, property, assets,
financial condition, results of operations or business prospects of the Loan
Parties taken as a whole which has not been set forth in this Agreement or in
the certificates, statements, agreements or other documents furnished in
writing to the Agent and the Banks prior to or at the date hereof in
connection with the transactions contemplated hereby.
5.1.11. Taxes.
All federal, state, local and other tax returns required to have been filed
with respect to the Loan Parties have been filed, and payment or adequate
provision has been made for the payment of all taxes, fees, assessments and
other governmental charges which have or may become due pursuant to said
returns or to assessments received, except to the extent that such taxes,
fees, assessments and other charges are not material or are being contested
in good faith by appropriate proceedings diligently conducted and for which
such reserves or other appropriate provisions, if any, as shall be required
by GAAP shall have been made. There are no agreements or waivers extending
the statutory period of limitations applicable to any federal income tax
return of any Loan Party for any period.
5.1.12. Consents and Approvals.
No consent, approval, exemption, order or authorization of, or a registration
or filing with, any Official Body or any other Person is required by any Law
or any agreement in connection with the execution, delivery and carrying out
of this Agreement and the other Loan Documents by any Loan Party, except as
listed on Schedule 5.1.12, all of which shall have been obtained or made on
or prior to the Closing Date except as otherwise indicated on Schedule
5.1.12.
5.1.13. No Event of Default; Compliance with Instruments.
No event has occurred and is continuing and no condition exists or will exist
after giving effect to the borrowings or other extensions of credit to be
made on the Closing Date under or pursuant to the Loan Documents which
constitutes an Event of Default or Potential Default. None of the Loan
Parties is in violation of (i)any term of its certificate of incorporation,
bylaws, certificate of limited partnership, partnership agreement,
certificate of formation, limited liability company agreement or other
organizational documents or (ii)any material agreement or instrument to which
it is a party or by which it or any of its properties may be subject or bound
where such violation would constitute a Material Adverse Change.
5.1.14. Patents, Trademarks, Copyrights, Licenses, Etc.
Each Loan Party owns or possesses all the material patents, trademarks,
service marks, trade names, copyrights, licenses, registrations, franchises,
permits and rights necessary to own and operate its properties and to carry
on its business as presently conducted and planned to be conducted by such
Loan Party, without known possible, alleged or actual material conflict with
the rights of others.
5.1.15. Insurance.
No notice has been given or claim made and no grounds exist to cancel or
avoid any of insurance policies of the type described in Section 7.1.3
(Maintenance of Insurance) or to reduce the coverage provided thereby.
5.1.16. Compliance with Laws.
The Loan Parties are in compliance in all material respects with all
applicable Laws (other than Environmental Laws which are specifically
addressed in Section 5.1.21 (Environmental Matters)) in all jurisdictions in
which any Loan Party is presently or will be doing business except where the
failure to do so would not constitute a Material Adverse Change.
5.1.17. Burdensome Restrictions.
None of the Loan Parties is bound by any contractual obligation, or subject
to any restriction in any organization document, or any requirement of Law
which could reasonably be expected to constitute a Material Adverse Change.
5.1.18. Investment Companies; Regulated Entities.
None of the Loan Parties is an "investment company" registered or required to
be registered under the Investment Company Act of 1940 or under the "control"
of an "investment company" as such terms are defined in the Investment
Company Act of 1940 and shall not become such an "investment company" or
under such "control." None of the Loan Parties is subject to any other
Federal or state statute or regulation limiting its ability to incur
Indebtedness for borrowed money (other than Regulation X of the Board of
Governors of the Federal Reserve System).
5.1.19. Plans and Benefit Arrangements.
(i) Except where the liability that could reasonably be expected to result
therefrom would not, individually or in the aggregate, result in a Material
Adverse Change, (a) the Loan Parties and each other member of the ERISA Group
are in compliance in all material respects with any applicable provisions of
ERISA with respect to all Plans and, as to the Borrower, Benefit
Arrangements; (b) there has been no Prohibited Transaction with respect to
any such Benefit Arrangement or any Plan which could result in any material
liability of the Loan Parties or any other member of the ERISA Group; (c) the
Loan Parties and all other members of the ERISA Group have made when due any
and all payments required to be made under any agreement relating to a
Multiemployer Plan or any Law pertaining thereto; (d) with respect to each
Plan the Loan Parties and each other member of the ERISA Group (i)have
fulfilled in all respects their obligations under the minimum funding
standards of ERISA, (ii)have not incurred any liability to the PBGC, except
for premiums in the ordinary course which are not overdue and (iii)have not
had asserted against them any penalty for failure to fulfill the minimum
funding requirements of Section 302 of ERISA; and (e) all Plans and Benefit
Arrangements have been administered in material compliance with their terms
and applicable Law.
(ii) Except where the liability that could reasonably be expected to result
therefrom would not, individually or in the aggregate, result in a Material
Adverse Change, no event requiring notice to the PBGC under Section
302(f)(4)(A) of ERISA has occurred or is reasonably expected to occur with
respect to any Plan, and no amendment with respect to which security is
required under Section 307 of ERISA has been made or is reasonably expected
to be made to any Plan.
(iii) Except where the liability that could reasonably be expected to result
therefrom would not, individually or in the aggregate, result in a Material
Adverse Change, neither the Loan Parties nor any other member of the ERISA
Group has incurred or reasonably expects to incur any material withdrawal
liability under Section 4201 of ERISA to any Multiemployer Plan or under
Section 4063 or 4064 of ERISA to any Plan;. Neither the Loan Parties nor any
other member of the ERISA Group has been notified by any Multiemployer Plan
or Plan that such Multiemployer Plan or Plan has been terminated within the
meaning of Sections 4041 A or 4064, respectively, of ERISA and, to the best
knowledge of the Borrower, no Multiemployer Plan is reasonably expected to be
reorganized or terminated, within the meaning of Title IV of ERISA.
(iv) To the best knowledge of Borrower, neither the Borrower nor any other
member of the ERISA Group has, within the preceding five years, entered into
a transaction to which either Section 4069 or Section 4212(c) of ERISA could
apply so as to subject Borrower or other member of the ERISA Group to a
liability, except where the liability that could reasonably be expected to
result therefrom would not result in a Material Adverse Change.
5.1.20. Employment Matters.
Each of the Loan Parties is in compliance with the Labor Contracts and all
applicable Federal, state and local labor and employment Laws including those
related to equal employment opportunity and affirmative action, labor
relations, minimum wage, overtime, child labor, medical insurance
continuation, worker adjustment and relocation notices, immigration controls
and worker and unemployment compensation, where such failure to comply would
constitute a Material Adverse Change. There are no outstanding grievances,
arbitration awards or appeals therefrom arising out of the Labor Contracts or
current or threatened strikes, picketing, handbilling or other work stoppages
or slowdowns at facilities of any of the Loan Parties which in any case would
constitute a Material Adverse Change.
5.1.21. Environmental Matters.
None of the Loan Parties has received any Environmental Complaint, including
but not limited to those from any Official Body or private Person alleging
that such Loan Party or any prior owner, operator or occupant of any of the
Property is a potentially responsible party under the Comprehensive
Environmental Response, Cleanup and Liability Act, 42 U.S.C. S 9601, et seq.,
the Resource Conservation and Recovery Act, 42 U.S.C. S 6901, et seq. or any
analogous state or local Law, which could reasonably be expected to
constitute a Material Adverse Change and none of the Loan Parties has any
reason to believe that such an Environmental Complaint might be received.
There are no pending or, to any Loan Party's knowledge, threatened
Environmental Complaints relating to any Loan Party or, to any Loan Party's
knowledge, any prior owner, operator or occupant of any of the Properties
pertaining to, or arising out of, any Contamination or violations of
Environmental Laws or Required Environmental Permits which could reasonably
be expected to constitute a Material Adverse Change.
5.1.22. Senior Debt Status.
The Obligations of each Loan Party under this Agreement, the Guaranty
Agreement and each of the other Loan Documents to which it is a party do rank
and will rank at least pari passu in priority of payment with all other
Indebtedness of such Loan Party except Indebtedness of such Loan Party to the
extent secured by Permitted Liens. There is no Lien upon or with respect to
any of the properties or income of any Loan Party which secures Indebtedness
or other obligations of any Person except for Permitted Liens.
5.2 Continuation of Representations.
The Borrower and Hovnanian make the representations and warranties in this
Section 5 on the date hereof and on the Closing Date and each date thereafter
on which a Loan is made or a Letter of Credit is issued as provided in and
subject to Sections 6.1 (First Loans and Letters of Credit) and 6.2 (Each
Additional Loan or Letter of Credit).
6. CONDITIONS OF LENDING AND ISSUANCE OF LETTERS OF CREDIT
The obligation of each Bank to make Loans and of the Agent and the Letter of
Credit Banks to issue Letters of Credit hereunder is subject to the
performance by each of the Loan Parties of its Obligations to be performed
hereunder at or prior to the making of any such Loans or issuance of such
Letters of Credit and to the satisfaction of the following further
conditions:
6.1 First Loans and Letters of Credit.
On the Closing Date:
6.1.1. Officer's Certificate.
The representations and warranties of each of the Loan Parties contained in
Section 5 (Representation and Warranties) and in each of the other Loan
Documents shall be true and correct on and as of the Closing Date with the
same effect as though such representations and warranties had been made on
and as of such date (except representations and warranties which relate
solely to an earlier date or time, which representations and warranties shall
be true and correct on and as of the specific dates or times referred to
therein), and each of the Loan Parties shall have performed and complied with
all covenants and conditions hereof and thereof, no Event of Default or
Potential Default shall have occurred and be continuing or shall exist; and
there shall be delivered to the Agent for the benefit of each Bank a
certificate of each of the Loan Parties, dated the Closing Date and signed by
the Chief Executive Officer, President or Chief Financial Officer of each of
the Loan Parties, to each such effect.
6.1.2. Incumbency Certificate.
There shall be delivered to the Agent for the benefit of each Bank a
certificate dated the Closing Date and signed by the Secretary or an
Assistant Secretary or the managing member (or equivalent), as the case may
be, of each of the Loan Parties, certifying as appropriate as to:
(i) all action taken by each Loan Party in connection with this Agreement and
the other Loan Documents;
(ii) the names of the officer or officers authorized to sign this Agreement
and the other Loan Documents and the true signatures of such officer or
officers and specifying the Authorized Officers permitted to act on behalf of
each Loan Party for purposes of this Agreement and the true signatures of
such officers, on which the Agent and each Bank may conclusively rely; and
(iii) as to Hovnanian and the Borrower only, copies of its organizational
documents, including its certificate of incorporation, bylaws, certificate of
limited partnership, partnership agreement, certificate of formation, and
limited liability company agreement as in effect on the Closing Date
certified by the appropriate state official where such documents are filed in
a state office together with certificates from the appropriate state
officials as to the continued existence and good standing of such Loan Party
in each state where organized, all as acceptable to the Agent.
6.1.3. Delivery of Loan Documents .
The Guaranty Agreement, the KHL Agreement , the Stock Pledge and the other
Loan Documents shall have been duly executed and delivered by Hovnanian to
the Agent for the benefit of the Banks, together with certificates evidencing
100% of the stock of KHL and stock powers therefor executed in blank.
6.1.4. Opinion of Counsel.
There shall be delivered to the Agent for the benefit of each Bank a written
opinion of Xxxxx Xxxxxxxx, Esquire, in-house counsel for the Loan Parties,
dated the Closing Date and in form and substance satisfactory to the Agent
and its counsel.
6.1.5. Legal Details.
All legal details and proceedings in connection with the transactions
contemplated by this Agreement and the other Loan Documents shall be in form
and substance satisfactory to the Agent and counsel for the Agent, and the
Agent shall have received all such other counterpart originals or certified
or other copies of such documents and proceedings in connection with such
transactions, in form and substance satisfactory to the Agent and said
counsel, as the Agent or said counsel may reasonably request.
6.1.6. Payment of Fees.
The Borrower shall have paid or caused to be paid to the Agent for itself and
for the account of the Banks to the extent not previously paid, all
commitment and other fees accrued through the Closing Date and the costs and
expenses for which the Agent and the Banks are entitled to be reimbursed.
6.1.7. Consents.
All material consents required to effectuate the transactions contemplated
hereby as set forth on Schedule 5.1.12 shall have been obtained.
6.1.8. Officer's Certificate Regarding MACs.
Since October 31, 2000, no Material Adverse Change shall have occurred, and
there shall have been delivered to the Agent for the benefit of each Bank a
certificate dated the Closing Date and signed by the Chief Executive Officer,
President or Chief Financial Officer of each Loan Party to each such effect.
6.1.9. No Actions or Proceedings.
No action, proceeding, investigation, regulation or legislation shall have
been instituted, threatened or proposed before any court, governmental agency
or legislative body to enjoin, restrain or prohibit, or to obtain damages in
respect of, this Agreement, the other Loan Documents or the consummation of
the transactions contemplated hereby or thereby.
6.1.10. Obligations under Existing Facility.
All obligations under or in connection with the Existing Facility shall have
been repaid in full and all security interests or liens granted in connection
therewith shall have been satisfied and there shall exist prior to such
repayment no events of default under the Existing Facility. The repayment of
outstanding loan amounts under the Existing facility owing to "Banks"
hereunder shall be effected by the making of "net-advances" on the Closing
Date. Each letter of credit issued under the Existing Facility shall be
deemed to be a "Letter of Credit" hereunder as of the Closing Date.
6.2 Each Additional Loan or Letter of Credit.
At the time of making any Loans or issuing any Letters of Credit other than
Loans made or Letters of Credit issued on the Closing Date and after giving
effect to the proposed extensions of credit: the representations and
warranties of the Loan Parties contained in Section 5 (Representations and
Warranties) and in the other Loan Documents shall be true and correct in all
material respects on and as of the date of such additional Loan or Letter of
Credit with the same effect as though such representations and warranties had
been made on and as of such date (except representations and warranties which
expressly relate solely to an earlier date or time, which representations and
warranties shall be true and correct in all material respects on and as of
the specific dates or times referred to therein); no Event of Default or
Potential Default shall have occurred and be continuing or shall exist; and
the Borrower shall have delivered to the Agent a duly executed and completed
Loan Request or application for a Letter of Credit as the case may be.
7. COVENANTS
7.1 Affirmative Covenants.
The Borrower and Hovnanian, jointly and severally, covenant and agree that
until payment in full of the Loans, Reimbursement Obligations and Letter of
Credit Borrowings, and interest thereon, expiration or termination of all
Letters of Credit, satisfaction of all of the Loan Parties' other Obligations
under the Loan Documents and termination of the Commitments, they shall, and
shall cause the other Loan Parties to, comply at all times with the following
affirmative covenants:
7.1.1. Preservation of Existence, Etc.
Each Loan Party shall maintain its legal existence as a corporation, limited
partnership or limited liability company and its license or qualification and
good standing in each jurisdiction in which its ownership or lease of
property or the nature of its business makes such license or qualification
necessary, except as otherwise expressly permitted in Section 7.2.4
(Liquidations, Mergers, Consolidations, Acquisitions) and except where
failure to do so could not reasonably be expected to constitute a Material
Adverse Change with respect to the Borrower or Hovnanian or with respect to
the Loan Parties taken as a whole.
7.1.2. Payment of Liabilities, Including Taxes, Etc.
Each Loan Party shall duly pay and discharge all material liabilities to
which it is subject or which are asserted against it, promptly as and when
the same shall become due and payable, including all material taxes,
assessments and governmental charges upon it or any of its properties,
assets, income or profits, prior to the date on which penalties attach
thereto, except to the extent that such liabilities, including taxes,
assessments or charges, are being contested in good faith and by appropriate
and lawful proceedings diligently conducted and for which such reserve or
other appropriate provisions, if any, as shall be required by GAAP shall have
been made, or to the extent that failure to discharge any such liabilities
would not result in any additional liability which would adversely affect to
a material extent the financial condition of the Borrower or Hovnanian or of
the Loan Parties taken as a whole, provided that the Loan Parties will pay
all such liabilities forthwith upon the commencement of proceedings to
foreclose any Lien which may have attached as security therefor.
7.1.3. Maintenance of Insurance.
Each Loan Party shall insure its properties and assets against loss or damage
by fire and such other insurable hazards as such assets are commonly insured
(including fire, extended coverage, property damage, workers' compensation,
public liability, flood and business interruption insurance) and against
other risks (including errors and omissions) in such amounts as similar
properties and assets are insured by prudent companies in similar
circumstances carrying on similar businesses, and with reputable and
financially sound insurers, including self-insurance to the extent customary.
7.1.4. Maintenance of Properties and Leases.
Each Loan Party shall maintain in good repair, working order and condition
(ordinary wear and tear excepted) in accordance with the general practice of
other businesses of similar character and size, all of those properties
necessary to its business, and from time to time, such Loan Party will make
or cause to be made all appropriate repairs, renewals or replacements
thereof.
7.1.5. Maintenance of Patents, Trademarks, Etc.
Each Loan Party shall maintain in full force and effect all patents,
trademarks, service marks, trade names, copyrights, licenses, franchises,
permits and other authorizations necessary for the ownership and operation of
its properties and business if the failure so to maintain the same would
constitute a Material Adverse Change.
7.1.6. Visitation Rights.
Each Loan Party shall permit any of the officers or authorized employees or
representatives of the Agent or (at the expense of such Bank) any of the
Banks to visit and inspect any of its properties and to examine and make
excerpts from its books and records and discuss its business affairs,
finances and accounts with its officers, all in such detail and at such times
and as often as any of the Banks may reasonably request, provided that each
Bank shall provide the Borrower and the Agent with reasonable notice prior to
any visit or inspection. In the event any Bank desires to conduct an audit
of any Loan Party, such Bank shall make a reasonable effort to conduct such
audit contemporaneously with any audit to be performed by the Agent.
7.1.7. Keeping of Records and Books of Account.
The Loan Parties shall maintain and keep proper books of record and account
which enable Hovnanian and its Subsidiaries to issue financial statements in
accordance with GAAP and as otherwise required by applicable Laws of any
Official Body having jurisdiction over Hovnanian or any Subsidiary of
Hovnanian, and in which full, true and correct entries shall be made in all
material respects of all its dealings and business and financial affairs.
7.1.8. Plans and Benefit Arrangements.
The Loan Parties shall, and shall cause each member of the ERISA Group that
is a Subsidiary to, and shall use its reasonable best efforts to cause each
other member of the ERISA Group to, comply with ERISA, the Internal Revenue
Code and other applicable Laws applicable to Plans and, as to the Borrower,
Benefit Arrangements, except where such failure, alone or in conjunction with
any other failure, would not result in a Material Adverse Change. Without
limiting the generality of the foregoing, the Loan Parties shall cause all
of their Plans and shall use reasonable best efforts to cause all Plans
maintained by any member of the ERISA Group, to be funded in accordance with
the minimum funding requirements of ERISA and shall make, and cause each
Subsidiary to, and shall use its reasonable best efforts to cause each member
of the ERISA Group to make, in a timely manner, all contributions due to
Plans and Multiemployer Plans except where such failure, alone or in
conjunction with any other failure, would not result in a Material Adverse
Change.
7.1.9. Compliance with Laws.
Each Loan Party shall comply with all applicable Laws, including all
Environmental Laws, in all respects, provided that it shall not be deemed to
be a violation of this Section 7.1.9 if any failure to comply with any Law
would not result in fines, penalties, remediation costs, other similar
liabilities or injunctive relief which in the aggregate would constitute a
Material Adverse Change.
7.1.10. Use of Proceeds.
The Loan Parties will use the Letters of Credit and the proceeds of the Loans
only for (i)general corporate purposes and for working capital for the
Borrower, Hovnanian and the Restricted Subsidiaries, and (ii) to repay and
terminate Indebtedness outstanding under the Existing Facility.
7.1.11. Required Dividends of KHL.
The Loan Parties shall cause KHL to pay to Hovnanian, at least annually, all
net income of KHL.
7.2 Negative Covenants.
The Borrower and Hovnanian, jointly and severally, covenant and agree that
until payment in full of the Loans, Reimbursement Obligations and Letter of
Credit Borrowings and interest thereon, expiration or termination of all
Letters of Credit, satisfaction of all of the Loan Parties' other Obligations
hereunder and termination of the Commitments, they shall, and shall cause the
other Loan Parties to, comply with the following negative covenants:
7.2.1. Indebtedness.
7.2.1.1 Each of the Loan Parties shall not at any time create, incur, assume
or suffer to exist any secured indebtedness, except Indebtedness secured by
Permitted Liens.
7.2.1.2 KHL shall not incur Indebtedness of any kind or suffer to exist any
Lien on its property or provide any Guaranty in respect of the Indebtedness
or other obligations of any Person, or become obligated to do so, and no Loan
Party shall allow any of the foregoing to occur.
7.2.1.3 The Loan Parties shall not permit any Mortgage Subsidiary to incur or
suffer to exist any Indebtedness if, after giving effect thereto, the ratio
of (x) debt to (y) equity plus the amount of any loans or Guaranties provided
by Hovnanian of such Mortgage Subsidiary exceeds 12.0-to-1.0.
7.2.2. Liens.
Each of the Loan Parties shall not at any time create, incur, assume or
suffer to exist any Lien on any of its property or assets, tangible or
intangible, now owned or hereafter acquired, or agree or become liable to do
so, except Permitted Liens.
7.2.3. Loans and Investments.
Each of the Loan Parties shall not, at any time, make or suffer to remain
outstanding any Investment except Permitted Investments and, to the extent
permitted by Section 7.2.6 (Restricted Payments; Restricted Investments),
Restricted Investments.
7.2.4. Liquidations, Mergers, Consolidations, Acquisitions.
Each of the Loan Parties shall not dissolve, liquidate or wind-up its
affairs, or become a party to any merger or consolidation, or acquire by
purchase, lease or otherwise all or substantially all of the assets or
capital stock of any other Person, provided that
(1) any Loan Party other than the Borrower or Hovnanian may consolidate or
merge into another Loan Party (or any Person that concurrently becomes a Loan
Party) which is wholly-owned by one or more of the other Loan Parties, and
(2) any Loan Party may consolidate or merge with a Person who is not a Loan
Party if the common stockholders of Hovnanian prior to such transaction
maintain at least 50% of the voting control (direct or indirect) of the
combined entity after consummation of the transaction, and
(3) any Loan Party may acquire, whether by purchase or by merger, (A)all or
substantially all of the ownership interests of another Person or (B)all or
substantially all of assets of another Person or of a business or division of
another Person (each, a "Permitted Acquisition"), provided that each of the
following requirements is met:
(i) if the Loan Parties are acquiring the ownership interests in such Person,
and such Person is, or concurrently will be, designated a Restricted
Subsidiary, such Person shall execute a Guarantor Joinder and join this
Agreement as a Guarantor pursuant to Section 10.18 )Joinder of Guarantors)
and the Borrower shall have otherwise complied with Section 2.11.4
(Designation of Restricted Subsidiary) on or before the date of such
Permitted Acquisition;
(ii) if such Person's shares are registered as "public" shares under
applicable law, the board of directors or other equivalent governing body of
such Person shall have approved such Permitted Acquisition;
(iii) the business acquired, or the business conducted by the Person whose
ownership interests are being acquired, as applicable, shall comply with
Section 7.2.8 [Continuation of or Change in Business]; and
(iv) no Potential Default or Event of Default shall exist immediately prior
to and after giving effect to such Permitted Acquisition.
(4) the Loan Parties may make, whether by purchase or merger or otherwise,
Permitted Investments and, to the extent permitted by Section 7.2.6
(Restricted Investments and Restricted Payments), Restricted Investments and
Restricted Payments;
(5) the Loan Parties may liquidate or wind-up Restricted Subsidiaries of
Hovnanian which are not individually material to Hovnanian, the Borrower or
to the Loan Parties taken as a whole; provided that the Loan Parties shall
satisfy the requirements of Section 2.11 [Designation of Subsidiaries and
Release of Guarantors], to the extent applicable;
(6) the Loan Parties may effectuate any sale permitted by Section 7.2.5 as
a merger or consolidation; and
(7) for the avoidance of doubt, any Loan Party may effect or allow the
liquidation or winding-up of any Non-Restricted Person.
7.2.5. Dispositions of Assets or Subsidiaries; Sale and
Leaseback.
7.2.5.1 Each of the Loan Parties shall not sell, convey, assign, lease,
abandon or otherwise transfer or dispose of, voluntarily or involuntarily,
any of its properties or assets, tangible or intangible (including sale,
assignment, discount or other disposition of accounts, contract rights,
chattel paper, equipment or general intangibles with or without recourse or
of capital stock, shares of beneficial interest, partnership interests or
limited liability company interests of a Subsidiary of such Loan Party, but
excluding Investments in Non-Restricted Persons), except:
(i) any sale, transfer or lease of assets in the ordinary course of business
which are no longer necessary or required in the conduct of such Loan Party's
business;
(ii) any sale, transfer or lease of assets to a Loan Party;
(iii) any sale, transfer or lease of assets in the ordinary course of
business which are replaced by substitute assets acquired not in violation of
this Agreement; or
(iv) any sale and leaseback permitted by Section 7.2.5.2.
7.2.5.2 The Loan Parties shall not, directly or indirectly, sell, transfer or
otherwise dispose of real and/or personal property with a view directly or
indirectly to the leasing back of the same or of any similar property except
for (i) sales and leasebacks of sample model homes and their contents; (ii)
sales and leasebacks of any office buildings and their contents, or (iii)
sales and leasebacks in the normal course of business.
7.2.6. Restricted Payments; Restricted Investments.
7.2.6.1 The Loan Parties shall not pay or make Restricted Payments or
Restricted Investments from and after January 31, 2001 which exceed in the
aggregate the sum of:
(i) $45,000,000;
(ii) 50% of net income of Hovnanian (calculated and consolidated in
accordance with GAAP) for all fiscal quarters commencing on February 1, 2001
and thereafter; and
(iii) 50% of the proceeds (less costs of issuance) of any issuance or sale of
equity of Hovnanian to any Person other than a Loan Party during all fiscal
quarters commencing on February 1, 2001 and thereafter.
7.2.6.2 Each of the Loan Parties shall not enter into or carry out any
transaction with any Affiliate (including purchasing property or services
from or selling property or services to any Affiliate of any Loan Party or
other Person but excluding transactions between Loan Parties) unless such
transaction is not otherwise prohibited by this Agreement, is entered into in
the ordinary course of business upon fair and reasonable arm's-length terms
and is in accordance with all applicable Law. Without limiting the foregoing,
the aggregate amount of all Indebtedness for owed or borrowed money owing to
any Loan Party by any officer or director, or relative thereof, shall not
exceed $4,000,000 in the aggregate owing at any one time and all such
Indebtedness shall bear interest at a rate not less than the coupon rate on
six month U.S. Treasury bills as of the date such Indebtedness is incurred.
7.2.6.3 The Loan Parties shall not pay or make (i) any Restricted Payment in
respect of Dividends and Capital Stock Retirement in excess of $25,000,000 in
the aggregate after January 31, 2001 or (ii) any Restricted Payment in
respect of the Subordinated Debt in excess of $25,000,000 in the aggregate
after January 31, 2001.
7.2.7. Subsidiaries, Partnerships and Joint Ventures.
Each of the Loan Parties shall not own or create directly or indirectly any
Subsidiaries other than (i) any Subsidiary which has executed the Guaranty
Agreement as Guarantor on the Closing Date, (ii) KHL, (iii) any Subsidiary
formed or acquired after the Closing Date which joins the Guaranty Agreement
as a Guarantor pursuant to Section 10.18 [Joinder of Guarantors] or (iv) any
Non-Restricted Person.
7.2.8. Continuation of or Change in Business.
Each of the Loan Parties shall not engage in any business other than the
homebuilding business or Existing Related Businesses.
7.2.9. Plans and Benefit Arrangements.
Each of the Loan Parties shall not engage in a Prohibited Transaction with
any Plan, Benefit Arrangement or Multiemployer Plan which, alone or in
conjunction with any other circumstances or set of circumstances, results in
liability under ERISA, except where the liability that could reasonably be
expected to result therefrom would not result in a Material Adverse Change.
7.2.10. Borrowing Base.
The Loan Parties shall not permit Senior Homebuilding Indebtedness minus the
face amount of outstanding letters of credit (whether "Letters of Credit" or
not) in respect of which a Loan Party is obligated and which is issued to
guaranty or assure the installation of site improvements on (or appurtenant
to) land owned by a Loan Party to exceed at any time the Borrowing Base.
Pursuant thereto, the Borrower shall make (or cause to be made), on the
Business Day following the date on which any such excess is calculated,
payments of principal of Senior Homebuilding Indebtedness sufficient to
reduce to zero ($0) on such date any such excess.
7.2.11. Minimum ATNW.
The Loan Parties shall not permit Adjusted Tangible Net Worth to be less than
the sum of: (i)$226,419,000 and (ii) 50% of Hovnanian's consolidated net
income (calculated and consolidated in accordance with GAAP) for each fiscal
quarter commencing on February 1, 2001 and thereafter in which net income was
earned (as opposed to a net loss) and (iii) 50% of the proceeds (less costs
of issuance) of any issuance or sale of equity of Hovnanian to any Person
other than a Loan Party during each fiscal quarter commencing on February 1,
2001 and thereafter.
7.2.12. Leverage Ratio.
(a) The Loan Parties shall not permit Actual Leverage to exceed 2.20-to-1.0
in any two (2) consecutive fiscal quarters in which the Fixed Charge Coverage
Ratio is less than 1.5-to-1.0; and
(b) The Loan Parties shall not permit Actual Leverage to exceed the Total
Debt Multiplier.
7.2.13. Inventory and Land Purchase Limits.
7.2.13.1 The Loan Parties shall not permit:
(i) The Dollar value of Unimproved Land to exceed twenty percent (20%) of the
sum of Adjusted Tangible Net Worth and the principal amount of the
Subordinated Debt, as calculated as of the end of each fiscal quarter;
(ii) The Dollar value of Finished Lots and Land under Development plus
Unimproved Land to exceed the sum of Adjusted Tangible Net Worth and the
principal amount of the Subordinated Debt, as calculated as of the end of
each fiscal quarter; or
(iii) The number of Unsold Dwelling Units existing as of the end of any
fiscal quarter to exceed 25% of the number of Dwelling Units conveyed to
third party purchasers within the previous twelve (12) months.
7.2.13.2 If the Fixed Charge Coverage Ratio is less than 1.0-to-1.0 and the
Cash Flow Coverage Ratio is less than 1.1-to-1.0 for two (2) consecutive
fiscal quarters (referred to herein as the "prior two quarters"), then,
during the fiscal quarter following the prior two quarters, the Loan Parties
shall not purchase land (whether Unimproved Land or otherwise) in amounts
which exceed in such quarter the lesser of:
(x) the total land portion of "cost of sales" as reflected in the financial
statements delivered pursuant to Section 7.3 [Reporting Requirements] for
sales by the Loan Parties to third party purchasers in arm's length
transactions during the immediately preceding fiscal quarter; and
(y) fifty percent (50%) of the total land portion of "cost of sales" as
reflected in the financial statements delivered pursuant to Section 7.3
(Reporting Requirements) for the average quarterly sales by the Loan Parties
to third party purchasers in arm's length transactions during the preceding
four (4) fiscal quarters.
7.2.14. Fiscal Year.
The Loan Parties shall not change their fiscal year from the twelve-month
period ending October 31.
7.2.15. Changes in Subordinated Debt Documents.
The Loan Parties shall not amend or modify any provisions of the documents
relating to the Subordinated Debt without providing at least ten (10)
calendar days' prior written notice to the Agent and the Banks, and, if the
same would adversely affect the interests of the Agent and the Banks,
obtaining the prior written consent of the Required Banks. No Loan Party
shall directly or indirectly make any payment on the Subordinated Debt which
would violate the provisions of any applicable subordination agreement or
provision. Neither the Senior Notes nor the Subordinated Debt shall become
secured.
7.3 Reporting Requirements.
The Borrower and Hovnanian, jointly and severally, covenant and agree that
until payment in full of the Loans, Reimbursement Obligations and Letter of
Credit Borrowings and interest thereon, expiration or termination of all
Letters of Credit, satisfaction of all of the Loan Parties' other Obligations
hereunder and under the other Loan Documents and termination of the
Commitments, they shall, and shall cause the other Loan Parties to, furnish
or cause to be furnished to the Agent and each of the Banks:
7.3.1. Quarterly Financial Statements.
As soon as available and in any event within fifty-five (55) calendar days
after the end of each of the first three fiscal quarters in each fiscal year
of Hovnanian, financial statements of Hovnanian, consisting of a consolidated
and consolidating balance sheet as of the end of such fiscal quarter and
related consolidated and consolidating statements of income, stockholders'
equity and cash flows for the fiscal quarter then ended and the fiscal year
through that date, all in reasonable detail and certified (subject to normal
year-end audit adjustments) by the Chief Executive Officer, President or
Chief Financial Officer or principal accounting officer of Hovnanian as
having been prepared in accordance with GAAP, consistently applied, and
setting forth in comparative form the respective financial statements for the
corresponding date and period in the previous fiscal year. The Loan Parties
will be deemed to have complied with the delivery requirements of this
Section 7.3.1 if within fifty-five (55) days after the end of their fiscal
quarter, the Borrower delivers to the Agent and each of the Banks a copy of
Hovnanian's Form 10-Q as filed with the SEC and the financial statements
contained therein meets the requirements described in this Section 7.3.1.
7.3.2. Annual Financial Statements.
As soon as available and in any event within ninety (90) days after the end
of each fiscal year of Hovnanian, financial statements of Hovnanian
consisting of a consolidated balance sheet as of the end of such fiscal year,
and related consolidated statements of income, stockholders' equity and cash
flows for the fiscal year then ended, all in reasonable detail and setting
forth in comparative form the financial statements as of the end of and for
the preceding fiscal year, and certified by independent certified public
accountants of nationally recognized standing satisfactory to the Agent. The
certificate or report of accountants shall be free of qualifications (other
than any consistency qualification that may result from a change in the
method used to prepare the financial statements as to which such accountants
concur) and shall not indicate the occurrence or existence of any event,
condition or contingency which would materially impair the prospect of
payment or performance of any covenant, agreement or duty of any Loan Party
under any of the Loan Documents or cause or constitute an Event of Default.
The Loan Parties will be deemed to have complied with the delivery
requirements of this Section 7.3.2 if within ninety (90) days after the end
of Hovnanian's fiscal year, the Borrower delivers to the Agent and each of
the Banks a copy of Hovnanian's Annual Report and Form 10-K as filed with the
SEC and the financial statements and separately delivers the above-referenced
certification of public accountants.
7.3.3. Certificates of the Borrower.
7.3.3.1 Compliance Certificate. Concurrently with the financial statements
of Hovnanian furnished to the Agent and to the Banks pursuant to Sections
7.3.1 (Quarterly Financial Statements) and 7.3.2 (Annual Financial
Statements):
(a) a certificate of the Borrower signed by the Chief Executive Officer,
President or Chief Financial Officer or principal accounting officer of the
Borrower, in the form of Exhibit 7.3.3.1, to the effect that, except as
described pursuant to Section 7.3.3.2 (Borrowing Base Certificate), (i)the
representations and warranties of the Borrower contained in Section 5.1
(Representations and Warranties) and in the other Loan Documents are true and
correct in all material respects on and as of the date of such certificate
with the same effect as though such representations and warranties had been
made on and as of such date (except representations and warranties which
expressly relate solely to an earlier date or time), (ii)no Event of Default
or Potential Default exists and is continuing on the date of such certificate
and (iii)containing calculations in sufficient detail to demonstrate
compliance as of the date of such financial statements with all financial
covenants contained in Section 7.2 (Negative Covenants).
(b) summary consolidated and consolidating financial statements for each of
(i) the Mortgage Subsidiaries as a group; (ii) the Non-Restricted Persons as
a group and (iii) the Borrower, Hovnanian and the Restricted Subsidiaries as
a group;
(c) summary financial statements for each Joint Venture in which any Loan
Party has a Subsidiary Investment greater than an amount equal to 2% of
Adjusted Tangible Net Worth as of the last day of the previous fiscal quarter
of Hovnanian; and
(d) to the extent not previously disclosed in writing to the Agent and the
Banks, a report of any changes to Schedule 1.1(C) including changes arising
under Section 2.11 (Designation of Subsidiaries and Release of Guarantors).
7.3.3.2 Borrowing Base Certificate.
As soon as available, but not later than fifty-five (55) days after the end
of each month, a Borrowing Base Certificate as of the end of such month,
appropriately completed, executed and delivered by an Authorized Officer,
together with a certificate of the Borrower signed by the Chief Executive
Officer, President or Chief Financial Officer or principal accounting officer
of the Borrower, in the form of Exhibit 7.3.3.2, to the effect that, except
as described pursuant to Section 7.3.4 (Notice of Default), no Event of
Default or Potential Default exists and is continuing on the date of such
Borrowing Base Certificate.
7.3.4. Notice of Default.
Promptly after any officer of any Loan Party has learned of the occurrence of
an Event of Default or Potential Default, a certificate signed by the Chief
Executive Officer, President or Chief Financial Officer or principal
accounting officer of such Loan Party setting forth the details of such Event
of Default or Potential Default and the action which such Loan Party proposes
to take with respect thereto.
7.3.5. Notice of Litigation.
Promptly after the commencement thereof, notice of all actions, suits,
proceedings or investigations before or by any Official Body or any other
Person against any Loan Party that involve a claim or series of claims in
excess of $1,000,000 or which could reasonably be expected to constitute a
Material Adverse Change.
7.3.6. Notice of Change in Debt Rating.
Within two (2) Business Days after Standard & Poor's or Xxxxx'x announces a
change in Hovnanian's Debt Rating, notice of such change. Hovnanian will
deliver together with such notice a copy of any written notification which
Hovnanian received from the applicable rating agency regarding such change of
Debt Rating.
7.3.7. Budgets, Forecasts, Other Reports and Information.
Promptly upon their becoming available to any Loan Party:
(i) any reports, notices or proxy statements generally distributed by
Hovnanian to its stockholders,
(ii) regular or periodic reports, including Forms 10-K, 10-Q and 8-K,
registration statements and prospectuses, filed by Hovnanian with the SEC,
and
(iii) such other reports and information as any of the Banks may from time to
time reasonably request. The Loan Parties shall also notify the Banks
promptly of the enactment or adoption of any Law which could reasonably be
expected to constitute a Material Adverse Change.
7.3.8. Notices Regarding Plans and Benefit Arrangements.
7.3.8.1 Certain Events.
Promptly after learning of the occurrence thereof, notice (including the
nature of the event and, when known, any action taken or threatened by the
Internal Revenue Service or the PBGC with respect thereto) of any of the
following events, or services of such events, if, individually or in the
aggregate, any liabilities or penalties resulting from such event(s) could
reasonably be expected to result in a Material Adverse Change:
(i) any Reportable Event with respect to any Plan,
(ii) any Prohibited Transaction which could subject any Loan Party or any
other member of the ERISA Group to a civil penalty assessed pursuant to
Section 502(i) of ERISA or a tax imposed by Section 4975 of the Internal
Revenue Code in connection with any Plan, any Benefit Arrangement or any
trust created thereunder,
(iii) any withdrawal from a Multiemployer Plan by the Borrower or any other
member of the ERISA Group under Title IV of ERISA or assertion by a
Multiemployer Plan that such a withdrawal has occurred
(iv) any cessation of operations (by any Loan Party or any other member of
the ERISA Group) at a facility in the circumstances described in
Section 4062(e) of ERISA,
(v) withdrawal by any Loan Party or any other member of the ERISA Group from
a Plan in the circumstances described in Section 4063 of ERISA or the
termination of such Plan in the circumstances described in Section 4064 of
ERISA,
(vi) a failure to make any required contribution to a Plan or the creation of
any Lien in favor of the PBGC or a Plan,
(vii) the adoption of an amendment to a Plan requiring the provision of
security to such Plan pursuant to Section 307 of ERISA, or
(viii) the distress termination of a Plan, under Title IV of ERISA, which has
insufficient assets to pay all liabilities.
7.3.8.2 Notices of Involuntary Termination and Annual Reports.
Promptly after receipt thereof, copies of (a)all notices received by any Loan
Party or any other member of the ERISA Group of the PBGC's intent to
terminate any Plan administered or maintained by the Borrower or any member
of the ERISA Group, or to have a trustee appointed to administer any such
Plan; and (b)at the request of the Agent or any Bank each annual report (IRS
Form 5500 series) and all accompanying schedules, the most recent actuarial
reports, the most recent financial information concerning the financial
status of each Plan administered or maintained by any Loan Party or any other
member of the ERISA Group, and schedules showing the amounts contributed to
each such Plan by or on behalf of the Borrower or any other member of the
ERISA Group in which any of their personnel participate or from which such
personnel may derive a benefit, and each Schedule B (Actuarial Information)
to the annual report filed by any Loan Party or any other member of the ERISA
Group with the Internal Revenue Service with respect to each such Plan.
7.3.8.3 Notice of Voluntary Termination.
Where a termination of any Plan would result in a Material Adverse Change,
promptly upon the filing thereof, copies of any Form 5310, or any successor
or equivalent form to Form 5310, filed with the PBGC in connection with the
termination of any Plan.
7.3.9. Update Regarding Subsidiary Matters.
On or before sixty (60) days after the Closing Date, the Borrower shall
deliver to the Agent and the Banks an updated and expanded Schedule 5.1.2,
including, as to each of Hovnanian's Subsidiaries, the percentage ownership
of each owner of: the issued and outstanding shares (referred to herein as
the "Subsidiary Shares") if such Subsidiary is a corporation, its outstanding
partnership interests (the "Partnership Interests") if such Subsidiary is a
partnership and its outstanding limited liability company interests (the "LLC
Interests") if such Subsidiary is a limited liability company. Schedule 5.1.2
shall also footnote the controlling interests of each Subsidiary if such
controlling interest is held by a Person other than Hovnanian or a Subsidiary
of Hovnanian.
8. DEFAULT
8.1 Events of Default.
An Event of Default shall mean the occurrence or existence of any one or more
of the following events or conditions (whatever the reason therefor and
whether voluntary, involuntary or effected by operation of Law):
8.1.1. Payments Under Loan Documents.
The Borrower shall fail to pay (i)any principal of any Loan (including
scheduled installments, mandatory prepayments or the payment due at
maturity), Reimbursement Obligation or Letter of Credit Borrowing when such
principal is due hereunder or (ii)any interest on any Loan, Reimbursement
Obligation or Letter of Credit Borrowing or any other amount owing hereunder
or under the other Loan Documents within three (3) Business Days after such
interest or other amount becomes due in accordance with the terms hereof or
thereof;
8.1.2. Breach of Warranty.
Any representation or warranty made at any time by any of the Loan Parties
herein or by any of the Loan Parties in any other Loan Document, or in any
certificate, other instrument or statement furnished pursuant to the
provisions hereof or thereof, shall prove to have been false or misleading in
any material respect as of the time it was made or furnished;
8.1.3. Breach of Certain Negative Covenants.
Any of the Loan Parties shall default in the observance or performance of any
covenant contained in Sections 7.2.10 (Borrower Base), 7.2.11 (Minimum
ATNW), 7.2.12 (Leverage Ratio) or 7.2.13 (Inventory and Land Purchase
Limits);
8.1.4. Breach of Other Covenants.
Any of the Loan Parties shall default in the observance or performance of any
other covenant, condition or provision hereof or of any other Loan Document
and such default shall continue unremedied for a period of thirty (30)
Business Days after notice to the Borrower from the Agent;
8.1.5. Defaults in Other Agreements or Indebtedness.
A default or event of default shall occur at any time under the terms of any
other agreement involving borrowed money or the extension of credit or any
other Indebtedness under which any Loan Party may be obligated as a borrower
or guarantor in excess of $1,000,000 in the aggregate, and such breach,
default or event of default consists of the failure to pay (beyond any period
of grace permitted with respect thereto, whether waived or not) any
Indebtedness when due (whether at stated maturity, by acceleration or
otherwise) or if such breach or default permits or causes the acceleration of
any Indebtedness (whether or not such right shall have been waived) or the
termination of any commitment to lend;
8.1.6. Final Judgments or Orders.
Any final judgments or orders for the payment of money in excess of
$1,000,000 in the aggregate shall be entered against any Loan Party by a
court having jurisdiction, which judgment is not discharged, vacated, bonded
or stayed pending appeal within a period of thirty (30) days from the date of
entry;
8.1.7. Loan Document Unenforceable.
Any of the Loan Documents shall cease to be legal, valid and binding
agreements enforceable against the party executing the same or such party's
successors and assigns (as permitted under the Loan Documents) in accordance
with the respective terms thereof or shall in any way be terminated (except
in accordance with its terms or as permitted under the Loan Documents) or
become or be declared ineffective or inoperative or shall in any way be
challenged or contested or cease to give or provide the respective Liens,
security interests, rights, titles, interests, remedies, powers or privileges
intended to be created thereby;
8.1.8. Uninsured Losses; Proceedings Against Assets.
Any of the Loan Parties' assets are attached, seized, levied upon or
subjected to a writ or distress warrant; or such come within the possession
of any receiver, trustee, custodian or assignee for the benefit of creditors
and the same is not cured within thirty (30) days thereafter and any of the
foregoing could reasonably be expected to constitute a Material Adverse
Change;
8.1.9. Notice of Lien or Assessment.
A notice of Lien or assessment in excess of $1,000,000 which is not a
Permitted Lien is filed of record with respect to all or any part of any of
the Loan Parties' assets by the United States, or any department, agency or
instrumentality thereof, or by any state, county, municipal or other
governmental agency, including the PBGC, or any taxes or debts owing at any
time or times hereafter to any one of these becomes payable and the same is
not paid within thirty (30) days after the same becomes payable;
8.1.10. Insolvency.
Any of (i) Hovnanian, (ii) the Borrower or (iii) Restricted Subsidiaries
owning as of the date of any event described in this Section 8.1.10 three
percent (3%) or more of the Dollar value of all of the assets of all of the
Subsidiaries of Hovnanian taken as a whole ceases to be solvent or admits in
writing its inability to pay its debts as they mature;
8.1.11. Events Relating to Plans and Benefit Arrangements.
Any of the following occurs: (i)any Reportable Event with respect to a Plan,
which the Agent reasonably determines in good faith constitutes grounds for
the termination of any Plan by the PBGC or the appointment of a trustee to
administer or liquidate any Plan, shall have occurred and be continuing;
(ii)proceedings shall have been instituted or other action taken to terminate
any Plan, or a termination notice shall have been filed with respect to any
Plan; (iii)a trustee shall be appointed to administer or liquidate any Plan;
(iv) the PBGC shall give notice of its intent to institute proceedings to
terminate any Plan or Plans or to appoint a trustee to administer or
liquidate any Plan; and, in the case of the occurrence of (i), (ii), (iii) or
(iv) above, the Agent reasonably determines in good faith that the amount of
any Loan Party's liability is likely to exceed 10% of its Consolidated
Tangible Net Worth; (v) any "accumulated funding deficiency" (as defined in
Section 302 of ERISA) shall exist with respect to any Plan, or any Lien in
favor of the PBGC or a Plan shall arise on the assets of the Borrower or any
other member of the ERISA Group, (vi)any Loan Party or any other member of
the ERISA Group shall make any amendment to a Plan with respect to which
security is required under Section 307 of ERISA; (vii)any Loan Party or any
other member of the ERISA Group shall incur any liability in connection with
a withdrawal from a Multiemployer Plan; (viii)any Loan Party or any other
member of the ERISA Group shall withdraw under Section 4063 of ERISA (or
shall be deemed under Section 4062(e) of ERISA to withdraw) from a Plan; or
(ix)any applicable Law is adopted, changed or interpreted by any Official
Body with respect to or otherwise affecting one or more Plans, Multiemployer
Plans or Benefit Arrangements and, with respect to any of the events
specified in (v), (vi), (vii), (viii) or (ix), the Agent reasonably
determines in good faith that any such occurrence, together with all other
such events, would be reasonably likely to result in a Material Adverse
Change;
8.1.12. Cessation of Business.
Any Loan Party ceases to conduct its business as contemplated, except as
expressly permitted under Section 7.2.4 (Liquidations, Mergers,
Consolidations, Acquisitions) or Section 7.2.5 (Dispositions of Assets or
Subsidiaries; Sale and Leaseback), or any Loan Party is enjoined, restrained
or in any way prevented by court order from conducting all or any material
part of its business and such injunction, restraint or other preventive order
is not dismissed within thirty (30) days after the entry thereof and any of
the foregoing could reasonably be expected to constitute a Material Adverse
Change;
8.1.13. Change of Control.
(i) Any person or group of persons (within the meaning of Sections 13(d) or
14(a) of the Securities Exchange Act of 1934, as amended) shall have acquired
beneficial ownership of (within the meaning of Rule 13d-3 promulgated by the
SEC under said Act) 40% or more of the voting capital stock of Hovnanian; or
(ii) within a period of twelve (12) consecutive calendar months, individuals
who were directors of the Borrower on the first day of such period, or who
were nominated by a majority of such directors, shall cease to constitute a
majority of the board of directors of the Borrower;
8.1.14. Involuntary Proceedings.
A proceeding shall have been instituted in a court having jurisdiction
seeking a decree or order for relief in respect of any of (i) Hovnanian, (ii)
the Borrower or (iii) Restricted Subsidiaries owning as of the date of any
event described in this Section 8.1.14 three percent (3%) or more of the
Dollar value of all of the assets of all of the Subsidiaries of Hovnanian
taken as a whole in an involuntary case under any applicable bankruptcy,
insolvency, reorganization or other similar law now or hereafter in effect,
or for the appointment of a receiver, liquidator, assignee, custodian,
trustee, sequestrator, conservator (or similar official) of any Loan Party
for any substantial part of its property, or for the winding-up or
liquidation of its affairs, and such proceeding shall remain undismissed or
unstayed and in effect for a period of sixty (60) consecutive days or such
court shall enter a decree or order granting any of the relief sought in such
proceeding; or
8.1.15. Voluntary Proceedings.
Any of (i) Hovnanian, (ii) the Borrower or (iii) Restricted Subsidiaries
owning as of the date of any event described in this Section 8.1.15 three
percent (3%) or more of the Dollar value of all of the assets of all of the
Subsidiaries of Hovnanian taken as a whole shall commence a voluntary case
under any applicable bankruptcy, insolvency, reorganization or other similar
law now or hereafter in effect, shall consent to the entry of an order for
relief in an involuntary case under any such law, or shall consent to the
appointment or taking possession by a receiver, liquidator, assignee,
custodian, trustee, sequestrator, conservator (or other similar official) of
itself or for any substantial part of its property or shall make a general
assignment for the benefit of creditors, or shall fail generally to pay its
debts as they become due, or shall take any action in furtherance of any of
the foregoing.
8.2 Consequences of Event of Default.
8.2.1. Events of Default Other Than Bankruptcy, Insolvencyor
Reorganization Proceedings.
If an Event of Default specified under Sections 8.1.1 (Payments Under Loan
Documents) through 8.1.13 (Change of Control) shall occur and be continuing,
the Banks and the Agent shall be under no further obligation to make Loans or
issue Letters of Credit, as the case may be, and the Agent may, and upon the
request of the Required Banks, shall (i)by written notice to the Borrower,
declare the unpaid principal amount of the Loan then outstanding and all
interest accrued thereon, any unpaid fees and all other Indebtedness of the
Borrower to the Banks hereunder and thereunder to be forthwith due and
payable, and the same shall thereupon become and be immediately due and
payable to the Agent for the benefit of each Bank without presentment,
demand, protest or any other notice of any kind, all of which are hereby
expressly waived, and (ii)require the Borrower to, and the Borrower shall
thereupon, deposit in an interest-bearing account with the Agent, as cash
collateral for its Obligations under the Loan Documents, an amount equal to
the maximum amount currently or at any time thereafter available to be drawn
on all outstanding Letters of Credit, and the Borrower hereby pledges to the
Agent and the Banks, and grants to the Agent and the Banks a security
interest in, all such cash as security for such Obligations. Upon the curing
of all existing Events of Default, the Agent shall return such cash
collateral to the Borrower; and
8.2.2. Bankruptcy, Insolvency or Reorganization Proceedings.
If an Event of Default specified under Section 8.1.14 (Involuntary
Proceedings) or 8.1.15 (Voluntary Proceedings) shall occur, the Banks shall
be under no further obligations to make Loans or issue Letters of Credit
hereunder and the unpaid principal amount of the Loans then outstanding and
all interest accrued thereon, any unpaid fees and all other Indebtedness of
the Borrower to the Banks hereunder and thereunder shall be immediately due
and payable, without presentment, demand, protest or notice of any kind, all
of which are hereby expressly waived; and
8.2.3. Set-off.
If an Event of Default shall occur and be continuing, any Bank to whom any
Obligation is owed by any Loan Party hereunder or under any other Loan
Document or any participant of such Bank which has agreed in writing to be
bound by the provisions of Section 9.13 (Equalization of Banks) and any
branch, Subsidiary or Affiliate of such Bank or participant anywhere in the
world shall have the right, in addition to all other rights and remedies
available to it, without notice to such Loan Party, to set-off against and
apply to the then unpaid balance of all past-due Loans and all other past-due
Obligations of the Borrower and the other Loan Parties hereunder or under any
other Loan Document any debt owing to, and any other funds held in any manner
for the account of, the Borrower or such other Loan Party by such Bank or
participant or by such branch, Subsidiary or Affiliate, including all funds
in all deposit accounts (whether time or demand, general or special,
provisionally credited or finally credited, or otherwise) now or hereafter
maintained by the Borrower or such other Loan Party for its own account (but
not including funds held in custodian or trust accounts) with such Bank or
participant or such branch, Subsidiary or Affiliate; and
8.2.4. Suits, Actions, Proceedings.
If an Event of Default shall occur and be continuing, and whether or not the
Agent shall have accelerated the maturity of Loans pursuant to any of the
foregoing provisions of this Section 8.2 (Consequences of Event of Default),
the Agent or any Bank, if owed any amount with respect to the Loans, may
proceed to protect and enforce its rights by suit in equity, action at law
and/or other appropriate proceeding, whether for the specific performance of
any covenant or agreement contained in this Agreement or the other Loan
Documents, including as permitted by applicable Law the obtaining of the ex
parte appointment of a receiver, and, if such amount shall have become due,
by declaration or otherwise, proceed to enforce the payment thereof or any
other legal or equitable right of the Agent or such Bank; and
8.2.5. Application of Proceeds.
From and after the date on which the Agent has taken any action pursuant to
this Section 8.2 (Consequences of Event of Default) and until all Obligations
of the Loan Parties have been paid in full, any and all proceeds received by
the Agent from the exercise of any remedy by the Agent, shall be applied as
follows:
(i) first, to reimburse the Agent and the Banks for out-of-pocket costs,
expenses and disbursements, including reasonable attorneys' and paralegals'
fees and legal expenses, incurred by the Agent or the Banks in connection
with collection of any Obligations of any of the Loan Parties under any of
the Loan Documents;
(ii) second, to the repayment of all Indebtedness then due and unpaid of the
Loan Parties to the Banks incurred under this Agreement or any of the other
Loan Documents, whether of principal, interest, fees, expenses or otherwise,
in such manner as the Agent may determine in its discretion; and
(iii) the balance, if any, as required by Law.
8.2.6. Other Rights and Remedies.
In addition to all of the rights and remedies contained in this Agreement or
in any of the other Loan Documents, the Agent shall have all of the rights
and remedies under applicable Law, all of which rights and remedies shall be
cumulative and non-exclusive, to the extent permitted by Law. The Agent may,
and upon the request of the Required Banks shall, exercise all post-default
rights granted to the Agent and the Banks under the Loan Documents or
applicable Law.
9. THE AGENT
9.1 Appointment.
Each Bank hereby irrevocably designates, appoints and authorizes PNC Bank to
act as Agent for such Bank under this Agreement and to execute and deliver or
accept on behalf of each of the Banks the other Loan Documents. Each Bank
hereby irrevocably authorizes the Agent to take such action on its behalf
under the provisions of this Agreement and the other Loan Documents and any
other instruments and agreements referred to herein, and to exercise such
powers and to perform such duties hereunder as are specifically delegated to
or required of the Agent by the terms hereof, together with such powers as
are reasonably incidental thereto. PNC Bank agrees to act as the Agent on
behalf of the Banks to the extent provided in this Agreement.
9.2 Delegation of Duties.
The Agent may perform any of its duties hereunder by or through agents or
employees (provided such delegation does not constitute a relinquishment of
its duties as Agent) and, subject to Sections 9.5 (Reimbursement and
Indemnification of Agent by the Borrower) and 9.6 (Exculpatory Provisions;
Limitation of Liability), shall be entitled to engage and pay for the advice
or services of any attorneys, accountants or other experts concerning all
matters pertaining to its duties hereunder and to rely upon any advice so
obtained.
9.3 Nature of Duties; Independent Credit Investigation.
The Agent shall have no duties or responsibilities except those expressly set
forth in this Agreement and no implied covenants, functions,
responsibilities, duties, obligations, or liabilities shall be read into this
Agreement or otherwise exist. The duties of the Agent shall be mechanical
and administrative in nature; the Agent shall not have by reason of this
Agreement a fiduciary or trust relationship in respect of any Bank; and
nothing in this Agreement, expressed or implied, is intended to or shall be
so construed as to impose upon the Agent any obligations in respect of this
Agreement except as expressly set forth herein. Without limiting the
generality of the foregoing, the use of the term "agent" in this Agreement
with reference to the Agent is not intended to connote any fiduciary or other
implied (or express) obligations arising under agency doctrine of any
applicable Law. Instead, such term is used merely as a matter of market
custom, and is intended to create or reflect only an administrative
relationship between independent contracting parties. Each Bank expressly
acknowledges (i) that the Agent has not made any representations or
warranties to it and that no act by the Agent hereafter taken, including any
review of the affairs of any of the Loan Parties, shall be deemed to
constitute any representation or warranty by the Agent to any Bank; (ii)that
it has made and will continue to make, without reliance upon the Agent, its
own independent investigation of the financial condition and affairs and its
own appraisal of the creditworthiness of each of the Loan Parties in
connection with this Agreement and the making and continuance of the Loans
hereunder; and (iii)except as expressly provided herein, that the Agent shall
have no duty or responsibility, either initially or on a continuing basis, to
provide any Bank with any credit or other information with respect thereto,
whether coming into its possession before the making of any Loan or at any
time or times thereafter.
9.4 Actions in Discretion of Agent; Instructions From the Banks.
The Agent agrees, upon the written request of the Required Banks, to take or
refrain from taking any action of the type specified as being within the
Agent's rights, powers or discretion herein, provided that the Agent shall
not be required to take any action which exposes the Agent to personal
liability or which is contrary to this Agreement or any other Loan Document
or applicable Law. In the absence of a request by the Required Banks, the
Agent shall have authority, in its sole discretion, to take or not to take
any such action, unless this Agreement specifically requires the consent of
the Required Banks or all of the Banks. Any action taken or failure to act
pursuant to such instructions or discretion shall be binding on the Banks,
subject to Section 9.6 (Exculpatory Provisions; Limitation of Liability).
Subject to the provisions of Section 9.6 (Exculpatory Provisions; Limitation
of Liability), no Bank shall have any right of action whatsoever against the
Agent as a result of the Agent acting or refraining from acting hereunder in
accordance with the instructions of the Required Banks, or in the absence of
such instructions, in the absolute discretion of the Agent.
9.5 Reimbursement and Indemnification of Agent by the Borrower.
The Borrower unconditionally agrees to pay or reimburse the Agent and hold
the Agent harmless against (a) liability for the payment of all reasonable
out-of-pocket costs, expenses and disbursements, including fees and expenses
of counsel (including the allocated costs of staff counsel), incurred by the
Agent (i)in connection with the development, negotiation, preparation,
printing, execution, administration, syndication, interpretation and
performance of this Agreement and the other Loan Documents, (ii)relating to
any requested amendments, waivers or consents pursuant to the provisions
hereof, (iii)in connection with the enforcement of this Agreement or any
other Loan Document or collection of amounts due hereunder or thereunder or
the proof and allowability of any claim arising under this Agreement or any
other Loan Document, whether in bankruptcy or receivership proceedings or
otherwise, and (iv)in any workout or restructuring or in connection with the
protection, preservation, exercise or enforcement of any of the terms hereof
or of any rights hereunder or under any other Loan Document or in connection
with any foreclosure, collection or bankruptcy proceedings, and (b)all
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind or nature whatsoever
which may be imposed on, incurred by or asserted against the Agent, in its
capacity as such, in any way relating to or arising out of this Agreement or
any other Loan Documents or any action taken or omitted by the Agent
hereunder or thereunder, provided that the Borrower shall not be liable for
any portion of such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements if the same
results from the Agent's gross negligence or willful misconduct, or if the
Borrower was not given notice of the subject claim and the opportunity to
participate in the defense thereof, at its expense (except that the Borrower
shall remain liable to the extent such failure to give notice does not result
in a loss to the Borrower), or if the same results from a compromise or
settlement agreement entered into without the consent of the Borrower, which
shall not be unreasonably withheld. In addition, after the occurrence and
during the continuance of an Event of Default, the Borrower agrees to
reimburse and pay all reasonable out-of-pocket expenses of the Agent's
regular employees and agents engaged periodically to perform audits of the
Loan Parties' books, records and business properties.
9.6 Exculpatory Provisions; Limitation of Liability.
Neither the Agent nor any of its directors, officers, employees, agents,
attorneys or Affiliates shall (a)be liable to any Bank for any action taken
or omitted to be taken by it or them hereunder, or in connection herewith
including pursuant to any Loan Document, unless caused by its or their own
gross negligence or willful misconduct, (b)be responsible in any manner to
any of the Banks for the effectiveness, enforceability, genuineness, validity
or the due execution of this Agreement or any other Loan Documents or for any
recital, representation, warranty, document, certificate, report or statement
herein or made or furnished under or in connection with this Agreement or any
other Loan Documents, or (c)be under any obligation to any of the Banks to
ascertain or to inquire as to the performance or observance of any of the
terms, covenants or conditions hereof or thereof on the part of the Loan
Parties, or the financial condition of the Loan Parties, or the existence or
possible existence of any Event of Default or Potential Default. No claim
may be made by any of the Loan Parties, any Bank, the Agent or any of their
respective Subsidiaries against the Agent, any Bank or any of their
respective directors, officers, employees, agents, attorneys or Affiliates,
or any of them, for any special, indirect or consequential damages or, to the
fullest extent permitted by Law, for any punitive damages in respect of any
claim or cause of action (whether based on contract, tort, statutory
liability, or any other ground) based on, arising out of or related to any
Loan Document or the transactions contemplated hereby or any act, omission or
event occurring in connection therewith, including the negotiation,
documentation, administration or collection of the Loans, and each of the
Loan Parties (for itself and on behalf of each of its Subsidiaries), the
Agent and each Bank hereby waive, release and agree never to xxx upon any
claim for any such damages, whether such claim now exists or hereafter arises
and whether or not it is now known or suspected to exist in its favor. Each
Bank agrees that, except for notices, reports and other documents expressly
required to be furnished to the Banks by the Agent hereunder or given to the
Agent for the account of or with copies for the Banks, the Agent and each of
its directors, officers, employees, agents, attorneys or Affiliates shall not
have any duty or responsibility to provide any Bank with credit or other
information concerning the business, operations, property, condition
(financial or otherwise), prospects or creditworthiness of the Loan Parties
which may come into the possession of the Agent or any of its directors,
officers, employees, agents, attorneys or Affiliates.
9.7 Reimbursement and Indemnification of Agent by Banks.
Each Bank agrees to reimburse and indemnify the Agent (to the extent not
reimbursed by the Borrower and without limiting the obligation of the
Borrower to do so) in proportion to its Ratable Share from and against all
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements, including attorneys' fees and
disbursements (including the allocated costs of staff counsel), and costs of
appraisers and environmental consultants, of any kind or nature whatsoever
which may be imposed on, incurred by or asserted against the Agent, in its
capacity as such, in any way relating to or arising out of this Agreement or
any other Loan Documents or any action taken or omitted by the Agent
hereunder or thereunder, provided that no Bank shall be liable for any
portion of such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements (a) if the same
results from the Agent's gross negligence or willful misconduct, or (b) if
such Bank was not given notice of the subject claim and the opportunity to
participate in the defense thereof, at its expense (except that such Bank
shall remain liable to the extent such failure to give notice does not result
in a loss to the Bank), or (c)if the same results from a compromise and
settlement agreement entered into without the consent of such Bank, which
shall not be unreasonably withheld. In addition, each Bank agrees promptly
upon demand to reimburse the Agent (to the extent not reimbursed by the
Borrower and without limiting the obligation of the Borrower to do so) in
proportion to its Ratable Share for all amounts due and payable by the
Borrower to the Agent in connection with the Agent's periodic audit of the
Loan Parties' books, records and business properties.
9.8 Reliance by Agent.
The Agent shall be entitled to rely upon any writing, telegram, telex or
teletype message, electronic mail, resolution, notice, consent, certificate,
letter, cablegram, statement, order or other document or conversation by
telephone or otherwise believed by it to be genuine and correct and to have
been signed, sent or made by the proper Person or Persons, and upon the
advice and opinions of counsel and other professional advisers selected by
the Agent. The Agent shall be fully justified in failing or refusing to take
any action hereunder unless it shall first be indemnified to its satisfaction
by the Banks against any and all liability and expense which may be incurred
by it by reason of taking or continuing to take any such action.
9.9 Notice of Default.
The Agent shall not be deemed to have knowledge or notice of the occurrence
of any Potential Default or Event of Default unless the Agent has received
written notice from a Bank or the Borrower referring to this Agreement,
describing such Potential Default or Event of Default and stating that such
notice is a "notice of default."
9.10 Notices.
The Agent shall promptly send to each Bank a copy of all notices received
from the Borrower pursuant to the provisions of this Agreement or the other
Loan Documents promptly upon receipt thereof. The Agent shall promptly
notify the Borrower and the other Banks of each change in the Base Rate and
the effective date thereof.
9.11 Banks in Their Individual Capacities; Agents in its Individual
Capacity.
With respect to its Revolving Credit Commitment, the Revolving Credit Loans
made by it and any other rights and powers given to it as a Bank hereunder or
under any of the other Loan Documents, the Agent shall have the same rights
and powers hereunder as any other Bank and may exercise the same as though it
were not the Agent, and the term "Bank" and "Banks" shall, unless the context
otherwise indicates, include the Agent in its individual capacity. PNC Bank
and its Affiliates and each of the Banks and their respective Affiliates may,
without liability to account, except as prohibited herein, make loans to,
issue letters of credit for the account of, acquire equity interests in,
accept deposits from, discount drafts for, act as trustee under indentures
of, and generally engage in any kind of banking, trust, financial advisory,
underwriting or other business with, the Loan Parties and their Affiliates,
in the case of the Agent, as though it were not acting as Agent hereunder and
in the case of each Bank, as though such Bank were not a Bank hereunder, in
each case without notice to or consent of the other Banks. The Banks
acknowledge that, pursuant to such activities, the Agent or its Affiliates
may (i)receive information regarding the Loan Parties or any of their
Subsidiaries or Affiliates (including information that may be subject to
confidentiality obligations in favor of the Loan Parties or such Subsidiary
or Affiliate) and acknowledge that the Agent shall be under no obligation to
provide such information to them, and (ii)accept fees and other consideration
from the Loan Parties for services in connection with this Agreement and
otherwise without having to account for the same to the Banks.
9.12 Holders of Notes.
The Agent may deem and treat any payee of any Note as the owner thereof for
all purposes hereof unless and until written notice of the assignment or
transfer thereof shall have been filed with the Agent. Any request,
authority or consent of any Person who at the time of making such request or
giving such authority or consent is the holder of any Note shall be
conclusive and binding on any subsequent holder, transferee or assignee of
such Note or of any Note or Notes issued in exchange therefor.
9.13 Equalization of Banks.
The Banks and the holders of any participations in any Commitments or Loans
or other rights or obligations of a Bank hereunder agree among themselves
that, with respect to all amounts received by any Bank or any such holder for
application on any Obligation hereunder or under any such participation,
whether received by voluntary payment, by realization upon security, by the
exercise of the right of set-off or banker's lien, by counterclaim or by any
other non-pro rata source, equitable adjustment will be made in the manner
stated in the following sentence so that, in effect, all such excess amounts
will be shared ratably among the Banks and such holders in proportion to
their interests in payments on the Loans, except as otherwise provided in
Section 3.4.3 (Agent's and Bank's Rights), 4.4.2 (Replacement of a Bank) or
4.6 (Additional Compensation in Certain Circumstances). The Banks or any
such holder receiving any such amount shall purchase for cash from each of
the other Banks an interest in such Bank's Loans in such amount as shall
result in a ratable participation by the Banks and each such holder in the
aggregate unpaid amount of the Loans, provided that if all or any portion of
such excess amount is thereafter recovered from the Bank or the holder making
such purchase, such purchase shall be rescinded and the purchase price
restored to the extent of such recovery, together with interest or other
amounts, if any, required by law (including court order) to be paid by the
Bank or the holder making such purchase.
9.14 Successor Agent.
The Agent (i)may resign as Agent or (ii)shall resign if such resignation is
requested by the Required Banks (if the Agent is a Bank, the Agent's Loans
and its Commitment shall be considered in determining whether the Required
Banks have requested such resignation) or required by Section 4.4.2
(Replacement of a Bank), in either case of (i) or (ii) by giving not less
than thirty (30) days' prior written notice to the Borrower. If the Agent
shall resign under this Agreement, then either (a)the Required Banks shall
appoint from among the Banks a successor agent for the Banks, subject to the
consent of the Borrower, such consent not to be unreasonably withheld, or
(b)if a successor agent shall not be so appointed and approved within the
thirty (30) day period following the Agent's notice to the Banks of its
resignation, then the Agent shall appoint from among the Banks, with the
consent of the Borrower, such consent not to be unreasonably withheld, a
successor agent who shall serve as Agent until such time as the Required
Banks appoint and the Borrower consents to the appointment of a successor
agent. Upon its appointment pursuant to either clause (a) or (b) above, such
successor agent shall succeed to the rights, powers and duties of the Agent,
and the term "Agent" shall mean such successor agent, effective upon its
appointment, and the former Agent's rights, powers and duties as Agent shall
be terminated without any other or further act or deed on the part of such
former Agent or any of the parties to this Agreement. After the resignation
of any Agent hereunder, the provisions of this Section 9 shall inure to the
benefit of such former Agent and such former Agent shall not by reason of
such resignation be deemed to be released from liability for any actions
taken or not taken by it while it was an Agent under this Agreement.
9.15 Agent's Fee.
The Borrower shall pay to the Agent a nonrefundable fee (the "Agent's Fee")
under the terms of a letter (the "Agent's Letter") between the Borrower and
Agent, as amended from time to time.
9.16 Availability of Funds.
The Agent may assume that each Bank has made or will make the proceeds of a
Loan available to the Agent unless the Agent shall have been notified by such
Bank on or before the later of (1)the close of Business on the Business Day
preceding the Borrowing Date with respect to such Loan or two (2) hours
before the time on which the Agent actually funds the proceeds of such Loan
to the Borrower (whether using its own funds pursuant to this Section 9.16 or
using proceeds deposited with the Agent by the Banks and whether such funding
occurs before or after the time on which Banks are required to deposit the
proceeds of such Loan with the Agent). The Agent may, in reliance upon such
assumption (but shall not be required to), make available to the Borrower a
corresponding amount. If such corresponding amount is not in fact made
available to the Agent by such Bank, the Agent shall be entitled to recover
such amount on demand from such Bank (or, if such Bank fails to pay such
amount forthwith upon such demand from the Borrower) together with interest
thereon, in respect of each day during the period commencing on the date such
amount was made available to the Borrower and ending on the date the Agent
recovers such amount, at a rate per annum equal to (i) the Federal Funds
Effective Rate during the first three (3) days after such interest shall
begin to accrue and (ii) the applicable interest rate in respect of such Loan
after the end of such three-day period.
9.17 Calculations.
In the absence of gross negligence or willful misconduct, the Agent shall not
be liable for any error in computing the amount payable to any Bank whether
in respect of the Loans, fees or any other amounts due to the Banks under
this Agreement. In the event an error in computing any amount payable to any
Bank is made, the Agent, the Borrower and each affected Bank shall, forthwith
upon discovery of such error, make such adjustments as shall be required to
correct such error, and any compensation therefor will be calculated at the
Federal Funds Effective Rate.
9.18 Beneficiaries.
Except as expressly provided herein, the provisions of this Section 9 (The
Agent) are solely for the benefit of the Agent and the Banks, and the Loan
Parties shall not have any rights to rely on or enforce any of the provisions
hereof. In performing its functions and duties under this Agreement, the
Agent shall act solely as agent of the Banks and does not assume and shall
not be deemed to have assumed any obligation toward or relationship of agency
or trust with or for any of the Loan Parties.
10. MISCELLANEOUS
10.1 Modifications, Amendments or Waivers.
With the written consent of the Required Banks, the Agent, acting on behalf
of all the Banks, and the Borrower, on behalf of the Loan Parties, may from
time to time enter into written agreements amending or changing any provision
of this Agreement or any other Loan Document or the rights of the Banks or
the Loan Parties hereunder or thereunder, or may grant written waivers or
consents to a departure from the due performance of the Obligations of the
Loan Parties hereunder or thereunder. Any such agreement, waiver or consent
made with such written consent shall be effective to bind all the Banks and
the Loan Parties; provided, that, without the written consent of all the
Banks, no such agreement, waiver or consent may be made which will:
10.1.1. Increase of Commitment.
Increase the amount of the aggregate Revolving Credit Commitments;
10.1.2. Extension of Payment; Reduction of Principal, Interest or
Fees; Modification of Terms of Payment.
Subject to Section 2.10 [Extension by Banks of the Expiration Date], but
whether or not any Loans are outstanding, extend the time for payment of
principal or interest of any Loan (excluding the due date of any mandatory
prepayment of a Loan or any mandatory Commitment reduction in connection with
such a mandatory prepayment hereunder except for mandatory reductions of the
Commitments on the Expiration Date), the Commitment Fee or any other fee
payable to any Bank, or reduce the principal amount of or the rate of
interest borne by any Loan or reduce the Commitment Fee or any other fee
payable to any Bank, or otherwise directly affect the terms of payment of the
principal of or interest of any Loan, the Commitment Fee or any other fee
payable to any Bank;
10.1.3. Miscellaneous
Amend Section 4.2 (Pro Rata Treatment of Banks), 9.6 (Exculpatory Provisions;
Limitation of Liability), 9.13 (Equalization of Banks) or this Section 10.1
(Modifications, Amendments or Waivers) change the pro rata treatment of the
Banks, change the definition of Required Banks, or change any requirement
providing for the Banks or the Required Banks to authorize the taking of any
action hereunder;
provided, that no agreement, waiver or consent which would modify the
interests, rights or obligations of the Agent in its capacity as Agent shall
be effective without the written consent of the Agent and provided further,
that no provision of Sections 2.1.2 (Swing Loan Commitment), 2.4.2 (Swing
Loan Requests), 2.5.2 (Making Swing Loans), 2.6 (Swing Loan Note), 2.8
(Borrowings to Repay Swing Loans) and 4.8 (Settlement Date Procedures) may be
amended or modified without the consent of PNC Bank.
10.2 No Implied Waivers; Cumulative Remedies; Writing Required.
No course of dealing and no delay or failure of the Agent or any Bank in
exercising any right, power, remedy or privilege under this Agreement or any
other Loan Document shall affect any other or future exercise thereof or
operate as a waiver thereof, nor shall any single or partial exercise thereof
or any abandonment or discontinuance of steps to enforce such a right, power,
remedy or privilege preclude any further exercise thereof or of any other
right, power, remedy or privilege. The rights and remedies of the Agent and
the Banks under this Agreement and any other Loan Documents are cumulative
and not exclusive of any rights or remedies which they would otherwise have.
Any waiver, permit, consent or approval of any kind or character on the part
of any Bank of any breach or default under this Agreement or any such waiver
of any provision or condition of this Agreement must be in writing and shall
be effective only to the extent specifically set forth in such writing.
10.3 Reimbursement and Indemnification of Banks by the Borrower;
Taxes.
The Borrower agrees unconditionally upon demand to pay or reimburse to each
Bank (other than the Agent, as to which the Borrower's Obligations are set
forth in Section 9.5 (Reimbursement and Indemnification of Agent by the
Borrower)) and to save such Bank harmless against (i)liability for the
payment of all reasonable out-of-pocket costs, expenses and disbursements
(including fees and expenses of counsel (including allocated costs of staff
counsel) for the Agent except with respect to (a) and (b) below), incurred by
the Agent (a)in connection with the administration and interpretation of this
Agreement, and other instruments and documents to be delivered hereunder,
(b)relating to any amendments, waivers or consents pursuant to the provisions
hereof, (c)in connection with the enforcement of this Agreement or any other
Loan Document, or collection of amounts due hereunder or thereunder or the
proof and allowability of any claim arising under this Agreement or any other
Loan Document, whether in bankruptcy or receivership proceedings or
otherwise, and (d)in any workout or restructuring or in connection with the
protection, preservation, exercise or enforcement of any of the terms hereof
or of any rights hereunder or under any other Loan Document or in connection
with any foreclosure, collection or bankruptcy proceedings, or (ii)all
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind or nature whatsoever
which may be imposed on, incurred by or asserted against the Agent, in its
capacity as such, in any way relating to or arising out of this Agreement or
any other Loan Documents or any action taken or omitted by the Agent
hereunder or thereunder, provided that the Borrower shall not be liable for
any portion of such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements (A)if the same
results from the Agent's gross negligence or willful misconduct, or (B)if the
Borrower was not given notice of the subject claim and the opportunity to
participate in the defense thereof, at its expense (except that the Borrower
shall remain liable to the extent such failure to give notice does not result
in a loss to the Borrower), or (C)if the same results from a compromise or
settlement agreement entered into without the consent of the Borrower, which
shall not be unreasonably withheld. The Borrower agrees unconditionally to
pay all stamp, document, transfer, recording or filing taxes or fees and
similar impositions now or hereafter determined by the Agent to be payable in
connection with this Agreement or any other Loan Document, and the Borrower
agrees unconditionally to save the Agent and the Banks harmless from and
against any and all present or future claims, liabilities or losses with
respect to or resulting from any omission to pay or delay in paying any such
taxes, fees or impositions.
10.4 Holidays.
Whenever payment of a Loan to be made or taken hereunder shall be due on a
day which is not a Business Day such payment shall be due on the next
Business Day (except as provided in Section 3.2 (Interest Periods) with
respect to Interest Periods under the LIBO-Rate Option) and such extension of
time shall be included in computing interest and fees, except that the Loans
shall be due on the Business Day preceding the Expiration Date if the
Expiration Date is not a Business Day. Whenever any payment or action to be
made or taken hereunder (other than payment of the Loans) shall be stated to
be due on a day which is not a Business Day, such payment or action shall be
made or taken on the next following Business Day, and such extension of time
shall not be included in computing interest or fees, if any, in connection
with such payment or action.
10.5 Funding by Branch, Subsidiary or Affiliate.
10.5.1. Notional Funding.
Each Bank shall have the right from time to time, without notice to the
Borrower, to deem any branch, Subsidiary or Affiliate (which for the purposes
of this Section 10.5 shall mean any corporation or association which is
directly or indirectly controlled by or is under direct or indirect common
control with any corporation or association which directly or indirectly
controls such Bank) of such Bank to have made, maintained or funded any Loan
to which the LIBO-Rate Option applies at any time, provided that immediately
following (on the assumption that a payment were then due from the Borrower
to such other office), and as a result of such change, the Borrower would not
be under any greater financial obligation (including pursuant to Section 4.6
(Additional Compensation in Certain Circumstances)) than it would have been
in the absence of such change. Notional funding offices may be selected by
each Bank without regard to such Bank's actual methods of making, maintaining
or funding the Loans or any sources of funding actually used by or available
to such Bank.
10.5.2. Actual Funding.
Each Bank shall have the right from time to time to make or maintain any Loan
by arranging for a branch, Subsidiary or Affiliate of such Bank to make or
maintain such Loan subject to the last sentence of this Section 10.5.2. If
any Bank causes a branch, Subsidiary or Affiliate to make or maintain any
part of the Loans hereunder, all terms and conditions of this Agreement
shall, except where the context clearly requires otherwise, be applicable to
such part of the Loans to the same extent as if such Loans were made or
maintained by such Bank, but in no event shall any Bank's use of such a
branch, Subsidiary or Affiliate to make or maintain any part of the Loans
hereunder cause such Bank or such branch, Subsidiary or Affiliate to incur
any cost or expenses payable by the Borrower hereunder or require the
Borrower to pay any other compensation to any Bank (including any expenses
incurred or payable pursuant to Section 4.6 (Additional Compensation in
Certain Circumstances)) which would otherwise not be incurred.
10.6 Notices.
Any notice, request, demand, direction or other communication (for purposes
of this Section 10.6 only, a "Notice") to be given to or made upon any party
hereto under any provision of this Agreement shall be given or made by
telephone or in writing (which includes means of electronic transmission
(i.e., "e-mail") or facsimile transmission or by setting forth such Notice on
a site on the World Wide Web (a "Website Posting") if Notice of such Website
Posting (including the information necessary to access such site) has
previously been delivered to the applicable parties hereto by another means
set forth in this Section 10.6 in accordance with this Section 10.6. Any
such Notice must be delivered to the applicable parties hereto at the
addresses and numbers set forth under their respective names on Schedule
1.1(B) hereof or in accordance with any subsequent unrevoked Notice from any
such party that is given in accordance with this Section 10.6. Any Notice
shall be effective:
(i) In the case of hand-delivery, when delivered;
(ii) If given by mail, four (4) days after such Notice is deposited with the
United States Postal Service, with first-class postage prepaid, return
receipt requested;
(iii) In the case of a telephonic Notice, when a party is contacted by
telephone, if delivery of such telephonic Notice is confirmed no later than
the next Business Day by hand delivery, a facsimile or electronic
transmission, a Website Posting or overnight courier delivery of a
confirmatory notice (received at or before noon on such next Business Day);
(iv) In the case of a facsimile transmission, when sent to the applicable
party's facsimile machine's telephone number if the party sending such Notice
receives confirmation of the delivery thereof from its own facsimile machine;
(v) In the case of electronic transmission, when actually received;
(vi) In the case of a Website Posting, upon delivery of a Notice of such
posting (including the information necessary to access such web site) by
another means set forth in this Section 10.6; and
(vii) If given by any other means (including by overnight courier), when
actually received.
Any Bank giving a Notice to a Loan Party shall concurrently send a copy
thereof to the Agent, and the Agent shall promptly notify the other Banks of
its receipt of such Notice.
10.7 Severability.
The provisions of this Agreement are intended to be severable. If any
provision of this Agreement shall be held invalid or unenforceable in whole
or in part in any jurisdiction, such provision shall, as to such
jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without in any manner affecting the validity or
enforceability thereof in any other jurisdiction or the remaining provisions
hereof in any jurisdiction.
10.8 Governing Law.
Each Letter of Credit and Section 2.10 (Letter of Credit Subfacility) shall
be subject to the Uniform Customs and Practice for Documentary Credits (1993
Revision), International Chamber of Commerce Publication No. 500, as the same
may be revised or amended from time to time, and to the extent not
inconsistent therewith, the internal laws of the State of New Jersey without
regard to its conflict of laws principles, and the balance of this Agreement
shall be deemed to be a contract under the Laws of the State of New Jersey
and for all purposes shall be governed by and construed and enforced in
accordance with the internal laws of the State of New Jersey without regard
to its conflict of laws principles.
10.9 Prior Understanding.
This Agreement and the other Loan Documents supersede all prior
understandings and agreements, whether written or oral, between the parties
hereto and thereto relating to the transactions provided for herein and
therein, including any prior confidentiality agreements and commitments.
10.10 Duration; Survival.
All representations and warranties of the Borrower and Hovnanian contained
herein or made in connection herewith shall survive the making of Loans and
issuance of Letters of Credit and shall not be waived by the execution and
delivery of this Agreement, any investigation by the Agent or the Banks, the
making of Loans, issuance of Letters of Credit, or payment in full of the
Loans. All covenants and agreements of the Borrower and Hovnanian contained
in Sections 7.1 (Affirmative Covenants), 7.2 [Negative Covenants] and 7.3
[Reporting Requirements] herein shall continue in full force and effect from
and after the date hereof so long as the Borrower may borrow or request
Letters of Credit hereunder and until termination of the Commitments and
payment in full of the Loans and expiration or termination of all Letters of
Credit. All covenants and agreements of the Borrower contained herein
relating to the payment of principal, interest, premiums, additional
compensation or expenses and indemnification, including those set forth in
Section 4 [Payments] and Sections 9.5 (Reimbursement and Indemnification of
Agent by the Borrower), 9.7 (Reimbursement and Indemnification of Agent by
Banks) and 10.3 (Reimbursement and Indemnification of Banks by Borrower;
Taxes), shall survive payment in full of the Loans, expiration or termination
of the Letters of Credit and termination of the Commitments.
10.11 Successors and Assigns.
(a) (i) This Agreement shall be binding upon and shall inure to the
benefit of the Banks, the Agent, the Loan Parties a party hereto and their
respective successors and assigns, except that none of the Loan Parties a
party hereto may assign or transfer any of its rights and obligations
hereunder or any interest herein. Each Bank may, at its own cost, make
assignments of or sell participations in all or any part of its Commitments
and the Loans made by it to one or more banks or other entities, subject to
the consent of the Borrower and the Agent with respect to any assignee, such
consent not to be unreasonably withheld provided that (1)no consent of the
Borrower shall be required (A) if an Event of Default exists and is
continuing, (B) in the case of an assignment by a Bank to an Affiliate of
such Bank, or (C) in respect of the sale of a participation and (2)any
assignment by a Bank to a Person other than an Affiliate of such Bank may not
be made in amounts less than the lesser of $10,000,000 or the amount of the
assigning Bank's Commitment. In the case of an assignment, upon receipt by
the Agent of the Assignment and Assumption Agreement, the assignee shall
have, to the extent of such assignment (unless otherwise provided therein),
the same rights, benefits and obligations as it would have if it had been a
signatory Bank hereunder, the Commitments shall be adjusted accordingly, and
upon surrender of any Note subject to such assignment, the Borrower shall
execute and deliver a new Note to the assignee, if such assignee requests
such a Note in an amount equal to the amount of the Revolving Credit
Commitment assumed by it and a new Revolving Credit Note to the assigning
Bank, if the assigning Bank requests such a Note, in an amount equal to the
Revolving Credit Commitment or retained by it hereunder. Any Bank which
assigns any or all of its Commitment or Loans to a Person other than an
Affiliate of such Bank shall pay to the Agent a service fee in the amount of
$3,500 for each assignment. In the case of a participation, the participant
shall only have the rights specified in Section 8.2.3 (Set-off) (the
participant's rights against such Bank in respect of such participation to be
those set forth in the agreement executed by such Bank in favor of the
participant relating thereto and not to include any voting rights except with
respect to changes of the type referenced in Sections 10.1.1 (ncrease of
Commitment, Extension of Expiration Date) or 10.1.2 (Extension of Payment;
Reduction of Principal, Interest or Fees; Modification of Terms of Payment)),
all of such Bank's obligations under this Agreement or any other Loan
Document shall remain unchanged, and all amounts payable by any Loan Party
hereunder or thereunder shall be determined as if such Bank had not sold such
participation.
(ii) Each Bank or assignee or participant of a Bank that is not incorporated
under the laws of the United States of America or a state thereof (and, upon
the written request of the Agent, each other Bank or assignee or participant
of a Bank) shall deliver to the Borrower and the Agent a Withholding
Certificate as described in Section 10.17 (Tax Withholding Clause) relating
to federal income tax withholding. Each Bank may furnish any publicly
available information concerning Hovnanian or any Loan Party and any other
information concerning Hovnanian or any Loan Party in the possession of such
Bank from time to time to assignees and participants (including prospective
assignees or participants), provided that such assignees and participants
agree to be bound by the provisions of Section 10.12 (Confidentiality).
(iii) Notwithstanding any other provision in this Agreement, any Bank may at
any time pledge or grant a security interest in all or any portion of its
rights under this Agreement, its Note (if any) and the other Loan Documents
to any Federal Reserve Bank in accordance with Regulation A of the FRB or
U.S. Treasury Regulation 31 CFR Section 203.14 without notice to or consent
of the Borrower or the Agent. No such pledge or grant of a security interest
shall release the transferor Bank of its obligations hereunder or under any
other Loan Document.
(b) Additional Bank. A lender which is to become a party to this Agreement
pursuant to Section 2.1.3 (Increase in Commitments After Closing Date) hereof
or otherwise (each an "Additional Bank") shall execute and deliver to the
Agent a Bank Joinder to this Agreement in substantially the form attached
hereto as Exhibit 1.1(B)(1). Upon execution and delivery of a Bank Joinder,
such Additional Bank shall be a party hereto and a "Bank" under each of the
Loan Documents for all purposes, except that such Additional Bank shall not
participate in any Revolving Credit Loans to which the LIBO-Rate Option
applies which are outstanding on the effective date of such Bank Joinder. If
Borrower should renew after the effective date of such Bank Joinder the LIBO-
Rate Option with respect to Revolving Credit Loans existing on such date,
Borrower shall be deemed to repay the applicable Revolving Credit Loans on
the renewal date and then reborrow a similar amount on such date so that the
Additional Bank shall participate in such Revolving Credit Loans after such
renewal date. Schedule 1.1(B) shall be amended and restated on the date of
such Bank Joinder to read as set forth on the attachment to such Bank
Joinder. Simultaneously with the execution and delivery of such Bank
Joinder, the Borrower shall execute, if requested, a Revolving Credit Note
and deliver it to such Additional Bank together with copies of such other
documents described in Section 7.1 (Affirmative Covenants) hereof as such
Additional Bank may reasonably require.
10.12 Confidentiality.
10.12.1. General.
The Agent and the Banks each agree to keep confidential all information
obtained from any Loan Party or its Subsidiaries which is nonpublic and
confidential or proprietary in nature (including any information the Borrower
specifically designates as confidential), except as provided below, and to
use such information only in connection with their respective capacities
under this Agreement and for the purposes contemplated hereby. The Agent and
the Banks shall be permitted to disclose such information (i)to outside legal
counsel, accountants and other professional advisors who need to know such
information in connection with the administration and enforcement of this
Agreement, subject to agreement of such Persons to maintain the
confidentiality, (ii) to Xxxxx'x, Standard & Poor's and similar rating
agencies, (iii)to assignees and participants as contemplated by Section 10.11
(Successors and Assigns), and prospective assignees and participants subject
to an agreement of such Persons to maintain the confidentiality, (iv)to the
extent requested by any bank regulatory authority or, with notice to the
Borrower, as otherwise required by applicable Law or by any subpoena or
similar legal process, or in connection with any investigation or proceeding
arising out of the transactions contemplated by this Agreement, (v)if it
becomes publicly available other than as a result of a breach of this
Agreement or becomes available from a source not known to be subject to
confidentiality restrictions, or (vi)if the Borrower shall have consented to
such disclosure.
10.12.2. Sharing Information With Affiliates of the Banks.
Each Loan Party a party hereto acknowledges that from time to time financial
advisory, investment banking and other services may be offered or provided to
the Borrower or one or more of its Affiliates (in connection with this
Agreement or otherwise) by any Bank or by one or more Subsidiaries or
Affiliates of such Bank and each of the Loan Parties a party hereto hereby
authorizes each Bank to share any information delivered to such Bank by such
Loan Party and its Subsidiaries pursuant to this Agreement, or in connection
with the decision of such Bank to enter into this Agreement, to any such
Subsidiary or Affiliate of such Bank, it being understood that any such
Subsidiary or Affiliate of any Bank receiving such information shall be bound
by the provisions of Section 10.12 (Confidentiality) as if it were a Bank
hereunder. Such Authorization shall survive the repayment of the Loans and
other Obligations and the termination of the Commitments.
10.13 Counterparts.
This Agreement may be executed by different parties hereto on any number of
separate counterparts, each of which, when so executed and delivered, shall
be an original, and all such counterparts shall together constitute one and
the same instrument.
10.14 Agent's or Bank's Consent.
Whenever the Agent's or any Bank's consent is required to be obtained under
this Agreement or any of the other Loan Documents as a condition to any
action, inaction, condition or event, unless specifically otherwise provided
herein, the Agent and each Bank shall be authorized to give or withhold such
consent in its sole and absolute discretion and to condition its consent upon
the giving of additional collateral, the payment of money or any other
matter.
10.15 Exceptions.
The representations, warranties and covenants contained herein shall be
independent of each other, and no exception to any representation, warranty
or covenant shall be deemed to be an exception to any other representation,
warranty or covenant contained herein unless expressly provided, nor shall
any such exceptions be deemed to permit any action or omission that would be
in contravention of applicable Law.
10.16 CONSENT TO FORUM; WAIVER OF JURY TRIAL.
EACH LOAN PARTY A PARTY HERETO HEREBY IRREVOCABLY CONSENTS TO THE
NONEXCLUSIVE JURISDICTION OF THE SUPERIOR COURT OF NEW JERSEY, LAW DIVISION,
MIDDLESEX COUNTY AND THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW
JERSEY AND WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT AND
CONSENTS THAT ALL SUCH SERVICE OF PROCESS BE MADE BY CERTIFIED OR REGISTERED
MAIL DIRECTED TO SUCH LOAN PARTY AT THE ADDRESSES PROVIDED FOR IN SECTION
10.6 (NOTICES) AND SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED UPON
ACTUAL RECEIPT THEREOF. EACH LOAN PARTY A PARTY HERETO WAIVES ANY OBJECTION
TO JURISDICTION AND VENUE OF ANY ACTION INSTITUTED AGAINST IT AS PROVIDED
HEREIN AND AGREES NOT TO ASSERT ANY DEFENSE BASED ON LACK OF JURISDICTION OR
VENUE. EACH LOAN PARTY A PARTY HERETO, THE AGENT AND THE BANKS HEREBY WAIVE
TRIAL BY JURY IN ANY ACTION, SUIT, PROCEEDING OR COUNTERCLAIM OF ANY KIND
ARISING OUT OF OR RELATED TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR ANY
COLLATERAL TO THE FULL EXTENT PERMITTED BY LAW.
10.17 Tax Withholding Clause.
Each Bank or assignee or participant of a Bank that is not incorporated under
the Laws of the United States of America or a state thereof (and, upon the
written request of the Agent, each other Bank or assignee or participant of a
Bank) agrees that it will deliver to each of the Borrower and the Agent two
(2) duly completed appropriate valid Withholding Certificates (as defined
under S 1.1441-1(c)(16) of the Income Tax Regulations ("Regulations"))
certifying its status (i.e., U.S. or foreign person) and, if appropriate,
making a claim of reduced, or exemption from, U.S. withholding tax on the
basis of an income tax treaty or an exemption provided by the Internal
Revenue Code. Such delivery may be made by electronic transmission as
described in S 1.1441-1(e)(4)(iv) of the Regulations if the Agent establishes
an electronic delivery system. The term "Withholding Certificate" means a
Form W-9; a Form W-8BEN; a Form W-8ECI; a Form W-8IMY and the related
statements and certifications as required under S 1.1441-1(e)(3) of the
Regulations; a statement described in S 1.871-14(c)(2)(v) of the Regulations;
or any other certificates under the Code or Regulations that certify or
establish the status of a payee or beneficial owner as a U.S. or foreign
person. Each Bank, assignee or participant required to deliver to the
Borrower and the Agent a valid Withholding Certificate pursuant to the
preceding sentence shall deliver such valid Withholding Certificate as
follows: (A) each Bank which is a party hereto on the Closing Date shall
deliver such valid Withholding Certificate at least five (5) Business Days
prior to the first date on which any interest or fees are payable by the
Borrower hereunder for the account of such Bank; (B) each assignee or
participant shall deliver such valid Withholding Certificate at least five
(5) Business Days before the effective date of such assignment or
participation (unless the Agent in its sole discretion shall permit such
assignee or participant to deliver such Withholding Certificate less than
five (5) Business Days before such date in which case it shall be due on the
date specified by the Agent). Each Bank, assignee or participant which so
delivers a valid Withholding Certificate further undertakes to deliver to
each of the Borrower and the Agent two (2) additional copies of such
Withholding Certificate (or a successor form) on or before the date that such
Withholding Certificate expires or becomes obsolete or after the occurrence
of any event requiring a change in the most recent Withholding Certificate so
delivered by it, and such amendments thereto or extensions or renewals
thereof as may be reasonably requested by the Borrower or the Agent.
Notwithstanding the submission of a Withholding Certificate claiming a
reduced rate of, or exemption from, United States withholding tax, the Agent
shall be entitled to withhold United States federal income taxes at the full
30% withholding rate if in its reasonable judgment it is required to do so
under the due diligence requirements imposed upon a withholding agent under S
1.1441-7(b) of the Regulations. Further, the Agent is indemnified under S
1.1461-1(e) of the Regulations against any claims and demands of any Bank or
assignee or participant of a Bank for the amount of any tax it deducts and
withholds in accordance with regulations under S 1441 of the Internal Revenue
Code.
10.18 Joinder of Guarantors.
Any Subsidiary of Hovnanian which is required to join the Guaranty Agreement
as a Guarantor pursuant to Section 7.2.7 (Subsidiaries, Partnerships and
Joint Ventures) or which is to become, a Restricted Subsidiary shall execute
and deliver to the Agent (i)a Guarantor Joinder pursuant to which it shall
join as a Guarantor the Guaranty Agreement; and (ii) at the request of the
Agent, documents in the forms described in Section 6.1 (First Loans and
Letters of Credit) modified as appropriate to relate to such new Guarantor.
Hovnanian and Borrower shall deliver such Guarantor Joinder and any related
documents that the Agent may reasonably request to the Agent after the
formation thereof and its designation as a Restricted Subsidiary; such
Subsidiary shall not be a Restricted Subsidiary until the delivery and
effectiveness of the items required herein.
10.19 Concerning Agent Terms.
Notwithstanding anything contained herein which may be construed to the
contrary, none of the Syndication Agent, the Documentation Agent and the
Joint Lead Arrangers and Joint Book Runners shall exercise any of the rights
or have any of the responsibilities of the Agent hereunder, or any other
rights or responsibilities other than their respective rights and
responsibilities (if any) as Banks hereunder.
(SIGNATURES CONTINUED ON NEXT PAGE)
IN WITNESS WHEREOF, the undersigned have executed this Agreement on the date
first written.
X. XXXXXXXXX ENTERPRISES, INC.
By:
Title:
PNC BANK, NATIONAL ASSOCIATION
as Agent and as a Bank
By:
Title:
BANK OF AMERICA, N.A.
By:
Title:
FLEET NATIONAL BANK
By:
Title:
FIRST UNION NATIONAL BANK
By:
Title:
GUARANTY BANK
By:
Title:
KEYBANK, NATIONAL ASSOCIATION
By:
Title:
BANK ONE, NA
By:
Title:
AMSOUTH BANK
By:
Title:
COMERICA BANK
By:
Title:
SUNTRUST BANK
By:
Title:
CREDIT SUISSE FIRST BOSTON
By:
Title:
WASHINGTON MUTUAL BANK, FA
By:
Title:
ACCEPTED AND AGREED:
HOVNANIAN ENTERPRISES, INC.
as a Guarantor
By:
Title:
SCHEDULE 1.1(A)
X. XXXXXXXXX ENTERPRISES, INC.
PRICING GRID
(expressed in basis points)
Level
Debt Rating
Libor Margin Base Rate Margin
Commitment Fee
LOC Fee
I BB+/Ba1 145 0 30.0 117.5
II BB/Ba2 165 15 32.5 137.5
III BB-/Ba3 185 40 37.5 157.5
IV B+/B1 205 60 42.5 177.5
V B/B2 225 80 47.5 197.5
The Applicable Margins will only be as shown above if Hovnanian holds both
noted Debt Ratings from S&P and Xxxxx'x, respectively. In the event of
inconsistent Debt Ratings, the Applicable Margin will be the midpoint of the
margin(s) between the two levels. In the absence of ratings, pricing will be
at Level V. As of the Closing Date, pricing shall be a Level III.
Any change in the Applicable Margin; the Applicable Commitment Fee Rate or
the Applicable Letter of Credit Fee Rate shall become effective five Business
Days after any public announcement of the change in the Debt Rating requiring
such change.
Bank
Amount of Commitment for Revolving Credit Loans
Ratable Share
Bank Name (also Agent):
PNC Bank, National Association
Address for Notices:
Xxx Xxxxx Xxxxxx, 00xx Xx
X. Xxxxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Address of Lending Office:
One PNC Plaza
MS: P1-XXXX-22-1
000 Xxxxx Xxxxxx
Xxxxxxxxxx, XX 00000-0000
Attention: Xxxx Xxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
$60,000,000 13.636%
Bank Name:
Bank of America, N.A.
Address for Notices:
000 X. XxXxxxx Xxxxxx
Mail Code IL 1-231-12-18
Xxxxxxx, XX 00000
Attention: Xxxxxx Xxxxxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Address of Lending Office:
000 X. XxXxxxx Xxxxxx
Mail Code IL 1-231-12-18
Xxxxxxx, XX 00000
Attention: Xxxxxxxx Xxxxxx-Xxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
$60,000,000 13.636%
Bank
Amount of Commitment for Revolving Credit Loans
Ratable Share
Bank Name:
Fleet National Bank
Address for Notices:
000 Xxxxxxxxx Xxxxxx Xxxxx XX
Xxxxx 000
Xxxxxxx, XX 00000
Attention: Xxxx Xxxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Address of Lending Office:
000 Xxxxxxxxx Xxxxxx Xxxxx XX
Xxxxx 000
Xxxxxxx, XX 00000
Attention: Xxxxx Xxxxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
$50,000,00 11.364%
Bank Name:
First Union National Bank
Address for Notices:
Commercial Real Estate Group
3rd Floor
0000 Xxxxxx Xxxxxx
Xxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Address of Lending Office:
Commercial Real Estate Group
3rd Floor
0000 Xxxxxx Xxxxxx
Xxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
$45,000,000 10.227%
Bank
Amount of Commitment for Revolving Credit Loans
Ratable Share
Bank Name:
Guaranty Bank
Address for Notices:
0000 Xxxxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xxxxx Xxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Address of Lending Office:
0000 Xxxxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xxxx Xxxxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
$40,000,000 9.091%
Bank Name:
KeyBank, National Association
Address for Notices:
0000 Xxxxxxxx
Xxxxx 000
Xxxxxx, XX 00000
Attention: Xxxx Xxxxxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
With a copy to:
00000 Xxxxxx Xxxxxxx
Xxxxx 000; L.B. #4
Xxxxxx, XX 00000
Attention: Xxxxx Xxxxxxxx
Telephone: (000) 000-0000 x00
Telecopy: (000) 000-0000
Bank
Amount of Commitment for Revolving Credit Loans
Ratable Share
Address of Lending Office:
0000 Xxxxxxxx
Xxxxx 000
Xxxxxx, XX 00000
Attention: Xxxx Xxxxxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
$30,000.00 6.818%
Bank Name:
Bank One, NA
Address for Notices:
Xxx Xxxx Xxx Xxxxx
Xxxxx XX 0-0000
Xxxxxxx, XX 00000
Attention: Xxxx Xxxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Address of Lending Office:
One Bank Xxx Xxxxx
Xxxxx XX 0-0000
Xxxxxxx, XX 00000
Attention: Xxx Xxxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
$30,000,000 6.818%
Bank Name:
AmSouth Bank
Address for Notices:
0000 0xx Xxxxxx; AST-9
Xxxxxxxxxx, XX 00000
Attention: Xxxxxx Xxxxxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Bank
Amount of Commitment for Revolving Credit Loans
Ratable Share
Address of Lending Office:
0000 0xx Xxxxxx; AST-9
Xxxxxxxxxx, XX 00000
Attention: Xxxxx Xxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
$25,000.00 5.682%
Bank Name:
Comerica Bank
Address for Notices:
000 Xxxxxxxx Xxxxxx
XX 0000
Xxxxxxx, XX 00000
Attention: Xxxxxxx Xxxxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Address of Lending Office:
000 Xxxxxxxx Xxxxxx
XX 0000
Xxxxxxx, XX 00000
Attention: Xxxxx Xxxxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
$25,000,000 5.682%
Bank
Amount of Commitment for Revolving Credit Loans
Ratable Share
Bank Name:
SunTrust Bank
Address for Notices:
000 Xxxxxxxxx Xxxxxx XX
0xx Xxxxx, XX 0000
X.X. Xxx 0000
Xxxxxxx, XX 00000-0000
Attention: Xxxxxx Xxxxxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Address of Lending Office:
000 Xxxxxxxxx Xxxxxx XX
0xx Xxxxx, XX 0000
X.X. Xxx 0000
Xxxxxxx, XX 00000-0000
Attention: Xxxxxxx Xxxxxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
$25,000,000 5.682%
Bank Name:
Credit Suisse First Boston
Address for Notices:
00 Xxxxxxx Xxxxxx
Xxx Xxxx, XX00000
Attention: Xxxx X'Xxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Address of Lending Office:
0 Xxxxx Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx Xxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
$25,000,000 5.682%
Bank
Amount of Commitment for Revolving Credit Loans
Ratable Share
Bank Name:
Washington Mutual Bank, FA
Address for Notices:
0000 XXX Xxxxxxx
Xxxxx 000
Xxxxxx, XX 00000
Attention: Xxxx Xxxx Xxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Address of Lending Office:
0000 Xxxxxxxxx Xxxxxxx
Xxxxxxx, XX 00000
Attention: Xxxxxx Xxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
$25,000,000 5.682%
Total $440,000,000 100%
AGENT
Name: Xxxxxxx X. Xxxx, Senior Vice President
Address: PNC Bank, National Association
Xxx Xxxxx Xxxxxx, 00xx Xxxxx
Xxxx Xxxxxxxxx, Xxx Xxxxxx 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
BORROWER:
Name: X. XXXXXXXXX ENTERPRISES, INC.
Address: 00 Xxxxx 00, X.X. Xxx 000
Xxx Xxxx, XX 00000
Attention: Xxxxx X. Xxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
GUARANTORS:
Name: [name of Guarantor]
Address: c/o X. Xxxxxxxxx Enterprises, Inc.
00 Xxxxx 00, X.X. Xxx 000
Xxx Xxxx, XX 00000
Attention: Xxxxx X. Xxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
